Question

Green Angel Inc. is an auto part maker and produces a particular product: Type X605. The standard costs and actual production results are listed as follows:

Cost standards for one unit of product Type X605:

Direct material 3 pounds at $2.5 per pound $7.5

Direct labor 5 hours at $8 per hour $40

Variable overhead 2.5 hours at $12 per hour $30

Actual production results:

Units produced 8,000 units

direct material purchased 23,500 pounds at $2.70 per pound

direct material used 23,500 pounds at $2.70 per pound

direct labor 42,000 hours at $7.8 per hour

Variable overhead 20,500 hours at $11.5 per hour

REQUIRED

a. Determine the direct material price and quantity variance, and identify whether the variances are Favorable or Unfavorable

b. Determine the direct labor rate and efficiency variance, and identify whether the variances are Favorable or Unfavorable

c. Determine the variable overhead spending and efficient variance

Show work please :)

Answer 1

Ans. A	Materials price variance = (Standard price   - Actual price) * Actual quantity
		($2.50 - $2.70) * 23,500
		-$0.20 * 23,500
		-$4,700	or   $4,700   unfavorable
	Materials quantity variance = (Standard quantity - Actual quantity) * Standard price
		(24,000 - 23,500) * $2.50
		500 * $2.50
		$1,250	Favorable
	*Standard quantity = Actual output * Standard quantity per unit of output
		8,000 units * 3 pounds per unit
		24,000 pounds
Ans. B	Direct labor rate variance = (Standard rate   - Actual rate) * Actual hours
		($8 - $7.8) * 42,000
		$0.2 * 42,000
		$8,400	Favorable
	Labor efficiency variance = (Standard hours - Actual hours) * Standard rate
		(40,000 - 42,000) * $8
		-2,000 * $8
		-$16,000	or   $16,000   unfavorable
	Standard hours = Actual units produced and sold * standard hours per unit
		8,000 units * 5 hours per unit
		40,000 hours
Ans. C	Variable Overhead rate variance = (Standard overhead rate   - Actual overhead rate) * Actual hours
		($12 - $11.5) * 20,500
		$0.5 * 20,500
		$10,250	Favorable
	Variable overhead efficiency variance = (Standard hours - Actual hours) * Standard rate
		(20,000 - 20,500) * $12
		-500 * $12
		-$6,000	or   $6,000   unfavorable
	Standard hours = Actual units produced and sold * standard hours per unit
		8,000 units * 2.5 hours per unit
		20,000 hours