Question

Standard Products Company recognizes variances from standards at the earliest opportunity and the quantity of direct materials purchased is equal to the quantity used. The following information is available for the most recent month:

                                                  Direct Materials                                         Direct Labor

Standard Quantity/ Unit                 8.00 pound                                                    3.6 hours

Standard Price/ Pound                  $8.20/ pound                                           

Standard Price / Hour                                                                                        $8.00/hour

Actual quantity/unit                      8.25 pound                                                   $3.8 hours

Actual price/pound                       $8.50 / pound                                               

Actual price/Hour                                                                                             $7.50 / hour

Static Budget volume                    800 units

Actual volume                              900 units

Actual overhead                           $12,000

Actual fixed overhead                   $5,100

Standard variable overhead           $5/ unit

Standard fixed overhead               $5,600

Q1. Calculate the Direct Material Price and Volume Variances:

-Price Variance:

-Volume Variance

Q2. Calculate the Direct Labor Rate and Efficiency Variances:

-Rate Variance:

-Efficiency Variance:

Q3. Calculate the Variable overhead Spending and Efficiency Variances:

-Variable Overhead Spending Variance:

-Variable Overhead Efficiency:

Q4. Calculate the Fixed Overhead Budget and Volume Variances

-Fixed Overhead Budget Variance:

-Fixed Overhead Volume Variance:

Thank you!!!

Answer 1

Solution:-

(1) Actual Qty in pound = 900*8.25 = 7425

Standard Qty for actual output = 900*8 = 7200

(a) DM Price variance = (Budgeted price-Actual price) * Actual Qty

= (8.20-8.50) * 7425 = 2227.5 (Adverse)

(b) DM Volume variance = (Standard Qty- Actual Qty) * Std Price

= (7200-7425) * 8.20 = 1845 (Adverse)

(2) Actual Hrs = 900*3.8 = 3420

Standard Hrs for actual output = 900*3.6 = 3240

(a) DL Rate variance = (Budgeted Rate-Actual Rate) * Actual Labour Hrs

= ((8-7.5) * 3420 = 1710 (Favourable)

(b) DL efficiency variance = (Standard Labour Hrs- Actual Hrs) * Std Rate

= (3240-3420) * 8 = 1440 (Adverse)

(3) (a) Variable O/H Spending variace =  ( SR ? AR ) × A Hrs

Std variable O/H = 900*5 = 4500

Actual variable O/H = 12000-5100 = 6900

SR = 4500/3240 = 1.389

AR = 6900/3420 = 2.018

= (1.389-2.018) * 3420 = 2151.18 (Adverse)

(b) V/OH Efficiency variance = ( Std hrs-actual hrs) * AR

= (3240-3420) * 2.018 = 363.24 ( Adverse)

(4) (b) Fixed O/H volume variance =

  Bdt F/Oh = 5600

  Fixed Overhead Application Rate = 5600/800 = 7

  Applied Fixed Overhead = 900*7 = 6300

  = 6300-5600 = 700(f)

(a) F/OH Exp variance = 5600-5100 = 500(f)

F/OH cost variance = 6300-5100 = 1200(f)