Question

The following data were drawn from the records of Campbell Corporation.

Planned volume for year (static budget)		4,100	units
Standard direct materials cost per unit		3.20	pounds	@	$	1.20	per pound
Standard direct labor cost per unit		3.00	hours	@	$	3.90	per hour
Total expected fixed overhead costs	$	17,630
Actual volume for the year (flexible budget)		4,300	units
Actual direct materials cost per unit		2.60	pounds	@	$	1.60	per pound
Actual direct labor cost per unit		3.20	hours	@	$	3.30	per hour
Total actual fixed overhead costs	$	13,130

Required

Prepare a materials variance information table showing the standard price, the actual price, the standard quantity, and the actual quantity.

Calculate the materials price and usage variances. Indicate whether the variances are favorable (F) or unfavorable (U).

Prepare a labor variance information table showing the standard price, the actual price, the standard hours, and the actual hours.

Calculate the labor price and usage variances. Indicate whether the variances are favorable (F) or unfavorable (U).

Calculate the predetermined overhead rate, assuming that Campbell uses the number of units as the allocation base.

Calculate the fixed cost spending variance. Indicate whether the variance is favorable (F) or unfavorable (U).

Calculate the fixed cost volume variance. Indicate whether the variance is favorable (F) or unfavorable (U).

Answer 1

• Al working forms part of the answer
• Actual Data for 4300 units

Actual DATA for		4300	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	11180	$       1.60	$ 17,888.00
Direct labor	13760	$       3.30	$ 45,408.00

• Standard data for Actual 4300 units

Standard DATA for		4300	units
	Quantity (SQ)	Rate (SR)	Standard Cost
Direct Material	13760	$       1.20	$ 16,512.00
Direct labor	12900	$       3.90	$ 50,310.00

• Variances Statement

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quatity
(	$                 1.20	-	$                 1.60	)	x	11180
	-4472
	Variance		4472			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	13760	-	11180	)	x	$                           1.20
	3096
	Variance		3096			Favourable-F
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$      16,512.00	-	$      17,888.00	)
	-1376
	Variance		1376			Unfavourable-U
Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                 3.90	-	$                 3.30	)	x	13760
	8256
	Variance		8256			Favourable-F
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	12900	-	13760	)	x	$                           3.90
	-3354
	Variance		3354			Unfavourable-U
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$      50,310.00	-	$      45,408.00	)
	4902
	Variance		4902			Favourable-F

• Fixed Overheads

Total expected = $17630
Expected units = 4100
Predetermined rate = 17630 / 4100 = $4.3 per unit

Spending Variance = Expected Fixed overheads – Actual Fixed Overhead = $17630 - $13130 = $4500 Favourable.

Volume variance = 4300 units x $4.3 = $18,490 - $13130 = $5360 Favourable.