Question

Kowaleski Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct materials 5.8 grams $ 7.00 per gram Direct labor 0.5 hours $ 14.00 per hour Variable overhead 0.5 hours $ 2.00 per hour In June the company produced 5,100 units using 30,830 grams of the direct material and 2,670 direct labor-hours. During the month the company purchased 25,000 grams of the direct material at a price of $6.80 per gram. The actual direct labor rate was $14.60 per hour and the actual variable overhead rate was $1.90 per hour. The materials price variance is computed when materials are purchased. Variable overhead is applied on the basis of direct labor-hours. Required: Compute the following variances for raw materials, direct labor, and variable overhead, assuming that the price variance for materials is recognized at point of purchase:

Answer 1

Std qty allowed (5100*5.80)			29580
Std price			7
Actual Qty purchased			30830
Actual Qty purchased			25000
Actual price			6.8
Material price variance = Actual qty purchased(Std price-Actual price)
		25000 (7-6.80 ) = 5000 Fav
Matrial Qty variance = Std price (Std qty-Actual Qty used)
		7.00 (29580-30830) =   8750 Unfav
Std Labour hours allowed (5100*0.5)				2550
Std rate per Hour				14
Actual Hours				2670
Actual rate				14.6
Lbour rate variance = Actual hours (Std rate -Actual rate")
		2670 (14 - 14.60) = 1602 Unfav
Labour efficiency variance = Std rate (Std hours-Actual hours)
		14.00 (2550-2670) = 1680 unfav
Std Variable Oh rate per hour: 2.00
Actual Rate per hour: 1.90
Variable Ohh rate variance = Actual hours (Std Oh rate-Actula rate)
		2670 (2.00-1.90) = 267 Fav
Variable Oh efficiency variance= Std rate (Std hours-Actual hours)
		2.00 (2550-2670 ) 240 Unfav