Question

Manlius Company produces a single product. Variable manufacturing overhead is applied to products on the basis of direct labor hours. The standard costs for one unit of product are as follows: Direct material: 6 ounces at $0.50 per ounce $3.00 Direct labor: 0.6 hours at $30.00 per hour $18.00 Variable manufacturing overhead: 0.6 hours at $10.00 per hour $6.00 Total standard variable cost per unit $27.00 During January, 2,000 units were produced. The costs associated with January’s operations were as follows: Material purchased: 18,000 ounces at $0.60 per ounce $10,800 Material used in production: 14,000 ounces Direct labor: 1,100 hours at $30.50 per hour $33,550 Variable manufacturing overhead costs incurred $12,980 Determine the direct materials variance, direct labor variance, and variable manufacturing overhead variance.

Answer 1

	Standard	Actual
Particulars	Qty/ hours	Rate	amount	Qty/ hours	Rate	amount
Materials	12,000.00	0.50	6,000.00	18,000.00	0.60	10,800.00
Labour	1,200.00	30.0000	36,000.00	1,100.00	30.50	33,550.00
Overhead	1,200.00	10.00	12,000.00	1,100.00	11.80	12,980.00
Actual output	2,000.00
Materials reqd =2000*6	12,000.00
Labour hrs reqd (2000*.60)	1,200.00
DMPV = (SP-AP)*AQ purchased
DMPV = (.50 - 60)18000
DMPV = 1800 U
DMQV= (SQ-AQ)SP
DMQV= (12000 -14000).50
DMQV= 1000 U
Direct material cost variance =1800 + 1000 = 2800 U
DLCV = 36000 - 33550
DLCV = 2450 F
DLRV= (SR-AR)AH
DLRV= (30 - 30.50)1100
DLRV= 550 U
DLEV = (SH-AH)SR
DLEV = (1200 - 1100)30
DLEV = 3000 F
VOCV = 12000- 12980
VOCV = 980 U
VORV = (SR-AR)AH
VORV = (10 - 11.80)1100
VORV = 1980 U
VOEV = (SH-AH)SR
VOEV = (1200 - 1100)10
VOEV = 1000F