Question

You have been given the following list of variances for the Pennadi Company:

  

Direct materials price variance	$	16,800	U
Direct materials quantity variance		12,000	U
Direct labour rate variance		16,270	F
Direct labour efficiency variance		27,000	U
Variable overhead spending variance		3,120	U
Variable overhead efficiency variance		6,000	U
Fixed overhead budget variance		5,000	U
Fixed overhead volume variance		53,250	F

You have also been given the following information:

  

Actual units produced		25,000
Budgeted units of production (normal volume)		20,000
Standard labour-hours for actual output		12,500
Standard material units for actual output		400,000
Actual direct labour costs	$	235,730
Actual cost of direct materials	$	496,800

Overhead is applied using direct labour-hours. Variable overhead is applied at the rate of $10 per direct labour-hour. The materials purchase price was $0.828.(Attempt the following questions in the order listed.)

6.	How many actual direct labour-hours were worked?

7.	What was the standard cost per unit of output produced, assuming that variable costing was used?

8.	Calculate the budgeted fixed overhead cost allocation rate. (Round your answer to 2 decimal places.)

9.	Calculate the actual, budgeted, and allocated fixed overhead costs.

10.	Calculate the underapplied or overapplied fixed overhead cost.

Answer 1

6) How many actual direct labours hours worked

Direct Lab rate var = (Std rate per labour hr - actual rate per labour hr)Actual direct labour hrs

16270 = (Std rate per lab hr*Actual lab hrs) - (Actual Rate per lab hr*Actual direct lab hrs)

16270 = (Std rate per lab hr*Actual lab hrs) - (Actual Direct lab cost)

16270 = (Std rate per lab hr*Actual lab hrs) - 235730(given)

(Std rate per lab hr*Actual lab hrs) = 16270+235730 = 252000

Now,

Direct Lab efficiency var = (Std Lab hrs -Actual lab hrs)*Std rate per Lab hr

-27000 = (Std Lab hrs*Std rate per lab hr) - (Actual lab hrs*Std rate per lab hr)

-27000 = (12500 * Std rate per lab hr) - 252000(calculated above)

(12500 * Std rate per lab hr) = -27000+252000= 225000

Std rate per lab hr = 225000/12500=18

So, Actual lab hrs = 252000/18 = 14000 hrs

7) Std Cost per unit of Product

First of all we need to claculate Std rate per Direct mat

Actual rate per direct mat = 0.828(given)

So, Actual Qty = Actual Direct mat cost / Actual rate per direct mat = 496800/0.828 = 600000

Now, Direct Mat price Var = (Std rate per direct mat - actual rate per direct mat) * Actual direct mat used

-16800 = (Std rate per direct mat * Actual direct mat used) - (Actual rate *Actual direct mat used)

-16800 = (Std rate per direct mat * 600000) - Actual direct mat cost( which is equal to 496800)

(Std rate per direct mat * 600000) = -16800+496800= 480000

Std rate per direct mat = 480000/600000 = 0.8

At this point of time, i realized something is wrong with the question as standard direct material units cant be 400000 because if std direct mat is 400000 then, Direct Mat qty Var = (400000-600000)0.8=160000 unfavourable but given in question 12000 unfavourtable, also variable OH efficiency var is not matching and i aslo think some information are missing, so please look into it