Question

Fine Oak Furniture manufactures high-quality wooden desks and uses a standard cost system. A standard cost card for one model of desk, the “heritage”, developed for 2019, is shown below:

Standard Cost per Unit:
Model: Heritage
	Standard		Standard			Standard
	Quantity		Price/Rate			Cost
Direct Materials	75	BF x	$ 0.45	per BF	=	$33.75
Direct Labour	1.25	Hrs x	$18.00	per Hr	=	$22.50
Variable Manufacturing Overhead	1.25	Hrs x	$4.00	per Hr	=	$5.00
Fixed Manufacturing Overhead	1.25	Hrs x	$6.00	per Hr	=	$7.50
Total Costs						$68.75
Note: BF stands for "board foot"

The company expected to produce and sell 300 units of the Heritage in March 2019.

Actual results for March 2019 are as follows:

• 310 units of the Heritage were produced.
• A total of 20,600 BF of wood was purchased and used at a cost of $9,990.
• Actual direct labour costs were $6,918 for 393 direct labour hours worked.
• Actual variable overhead incurred was $1,701 and actual fixed overhead incurred was $2,197.

Required:

Calculate the following variances and provide only numeric values without any formatting to the boxes given below. Be sure to indicate whether the variances are favourable or unfavourable as instructed. Round to the 4th decimal places for interim numbers, and round to the 2nd decimal places for final results.

	Variance Value	Favorable/Unfavorable		Explanation
	(absolute value)	(enter "1" for favorable, enter "0" for unfavorable)
Example: DM Price Variance	100	0		100U
a) Material price variance:	Blank 1. Calculate the answer by read surrounding text.	Blank 2. Calculate the answer by read surrounding text.
b) Material quantity variance:	Blank 3. Calculate the answer by read surrounding text.	Blank 4. Calculate the answer by read surrounding text.
c) Direct labour rate variance:	Blank 5. Calculate the answer by read surrounding text.	Blank 6. Calculate the answer by read surrounding text.
d) Direct labour efficiency variance:	Blank 7. Calculate the answer by read surrounding text.	Blank 8. Calculate the answer by read surrounding text.
e) Variable overhead spending variance:	Blank 9. Calculate the answer by read surrounding text.	Blank 10. Calculate the answer by read surrounding text.
f) Variable overhead efficiency variance:	Blank 11. Calculate the answer by read surrounding text.	Blank 12. Calculate the answer by read surrounding text.
g) Fixed overhead budget variance:	Blank 13. Calculate the answer by read surrounding text.	Blank 14. Calculate the answer by read surrounding text.
h) Fixed overhead volume variance:	Blank 15. Calculate the answer by read surrounding text.	Blank 16. Calculate the answer by read surrounding text.

      

Answer 1

Standard Data
	Standard Qty for 1 unit of Output	Standard Price	Standard Cost
Direct Materials (BF, $/BF)	75	$                                  0.45	$                             33.75
Direct Labour (hours,$/hour)	1.25	$                               18.00	$                             22.50
Variable Manufacturing Overheads (hours, $/hour)	1.25	$                                  4.00	$                                5.00
Fixed Manufacturing Overheads (hours, $/hour)	1.25	$                                  6.00	$                                7.50
Actual Data
	Actual Qty	Actual Price	Actual Cost
Direct Materials (BF, $/BF)	20600	$                                  0.48	$                       9,990.00
Direct Labour (hours,$/hour)	393	$                               17.60	$                       6,918.00
Variable Manufacturing Overheads (hours, $/hour)	393	$                                  4.33	$                       1,701.00
Fixed Manufacturing Overheads (hours, $/hour)			$                       2,197.00

	Variance Value	Favorable/Unfavorable
	(absolute value)	(enter "1" for favorable, enter "0" for unfavorable)
a)Material price variance	720	0
b) Material quantity variance	1192.5	1
c) Direct labour rate variance	156	1
d) Direct labour efficiency variance	99	0
e) Variable overhead spending variance	129	0
f) Variable overhead efficiency variance	22	0
g) Fixed overhead budget variance	53	1
h) Fixed overhead volume variance	75	1

Calculations:
a)Material price variance	=(Std Price - Actual Price)*Actual Qty
	=(0.45-0.48)*20600
	$                                         (720.00)	Unfavourable
b) Material quantity variance	=(Std Qty for actual output - Actual Qty)*Std Price
	= (75/1*310-20600)*0.45
	$                                       1,192.50	favourable
c) Direct labour rate variance	=(Std. rate/hour - actual rate/hour)*Actual hours
	=(18-17.6)*393
	$                                           156.00	Favourable
d) Direct labour efficiency variance	=(Std hours for actual output - Actual hours)*std rate
	=(1.25*310-393)*18
	$                                           (99.00)	Unfavourable
e) Variable overhead spending variance	=(Std rate/Hour - Actual rate/hour)*Actual hours
	=(4-4.33)*393
	$                                         (129.00)	Unfavourable
f) Variable overhead efficiency variance	=(Std. hours for actual output - actual hours)*Std .rate
	=(1.25*310-393)*4
	$                                           (22.00)	Unfavourable
g) Fixed overhead budget variance	=Std fixed overheads for actual output - Actual fixed overheads
	=(1.25*6*300-2197)
	$                                             53.00	Favourable
h) Fixed overhead volume variance	=(Actual output*std rate Per unit) - Stnadard fixed overheads
	=(310*1.25*6)-(7.5*300)
	$                                             75.00	Favourable