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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