Question

In: Accounting

Hamline Manufacturing makes a single product. Standard costs are given below. Manufacturing Cost Elements Quality *...

Hamline Manufacturing makes a single product. Standard costs are given below.

Manufacturing Cost Elements Quality * Price = Cost

Direct Materials 6 oz. * $0.90 = $5.40

Direct Labor 0.5hrs * 12.00 = 6.00

Manufacturing overhead 0.5hrs * 4.80 = 2.40

$13.80

During the month, the following transactions occurred in manufacturing 10,000 units.

58,000 ounces of materials were purchased at $1.00 per ounce.
All the materials purchased were used to produce the 10,000 units.
4,900 direct labor hours were worked at a total labor cost of $56,350.
Variable manufacturing overhead incurred was $15,000 and fixed overhead incurred was $10,400.

Compute the total variance and the variances for direct materials and direct labor elements.

Solutions

Expert Solution

Material price variance
AP (a) SP (b) Variance (c=b-a) AQ (d) Total variance (e=c*d) F/U
Material price variance = (AP-SP)*AQ
AP = Actual price per unit = $1
SP = Standard price per unit = $0.9
AQ = Actual quantity consumed= 58000
F= Favourable
U = Unfavourable
Material price variance
AP (a) SP (b) Variance (c=b-a) AQ (d) Total variance (e=c*d) F/U
1 0.9 -0.1 58000 -5800 U
Material quantity variance
AQ (a) SQ (b) Variance (c=b-a) SP (d) Total variance (e=c*d) F/U
Material quantity variance = (AQ-SQ)*SP
AQ = Actual quantity consumed= 58000
SQ = Standard quantity = 10000*6 = 60000
SP = Standard price per unit = $0.9
F= Favourable
U = Unfavourable
Material quantity variance
AQ (a) SQ (b) Variance (c=b-a) SP (d) Total variance (e=c*d) F/U
58000 60000 2000 0.9 1800 F
Total Material variance
Total Actual Total Std Total variance F/U
58000 54000 -4000 U
(58000*1) (10000*6*0.9)
Labor Rate variance
AR (a) SR (b) Variance (c=b-a) AH (d) Total variance (e=c*d) F/U
Labor Rate variance = (AR-SR)*AH
AR = Actual Rate per hour = 56350/4900 = $11.5
SR = Standard Rate per hour = $12
AH = Actual hours = 4900
F= Favourable
U = Unfavourable
Labor Rate variance
AR (a) SR (b) Variance (c=b-a) AH (d) Total variance (e=c*d) F/U
11.5 12 0.5 4900 2450 F
Labor Efficiency variance
AH (a) SH (b) Variance (c=b-a) AR (d) Total variance (e=c*d) F/U
Labor Efficiency variance = (AH-SH)*AR
AH = Actual hours = 4900
SH = Standard Hours = 10000*0.5 = 5000
SR = Standard Rate per hour = $12
F= Favourable
U = Unfavourable
Labor Efficiency variance
AH (a) SH (b) Variance (c=b-a) SR (d) Total variance (e=c*d) F/U
4900 5000 100 12 1200 F
Total Labor variance
Total Actual Total Std Total variance F/U
56350 60000 3650 U
(10000*0.5*12)

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