Question

2.Kowaleski Corporation makes a product with the following standard costs:

direct materials standard quantity or hours = 2.8

direct materials standard price or rate = $4.00

direct labor standard quantity or hours = 0.1 hours

direct labor standard price or rate = $21.00 per hour

variable overhead standard quantity or hours = 0.1 hours

variable overhead standard price or rate $4.00

In June the company produced 9,100 units using 27,010 kilos of the direct material and 930 direct labor-hours. During the month the company purchased 30,600 kilos of the direct material at a price of $3.70 per kilo. The actual direct labor rate was $19.90 per hour and the actual variable overhead rate was $4.20 per hour. The materials price variance is computed when materials are purchased. Variable overhead is applied on the basis of direct labor-hours.

a. Compute the materials quantity variance.

b. Compute the materials price variance.

c. Compute the labor efficiency variance.

d. Compute the labor rate variance.

e. Compute the variable overhead efficiency variance.

f. Compute the variable overhead rate variance.

Answer 1

Req a:
Std quantity allowed (9100*2.8):			25480	Kilo
Std price: $4
Actual quantity: 27010 kilo
Std Quantity Variance= Std price (Std Quantity-Actual Quantity)
		4.00 (25480-27010)= $6120 U
Req b:
Actual price: $ 3.70 per kilo
Actual purchase quantity: 30600 kilo
Material price variance= Actual qty purchase (Std price-Actual price)
		30600 (4.00-3.70) = $ 9180 F
Req C:
Std hourrs allowed (9100*0.1): 910 hours
Std rate per hour: $ 21
Actual labur hours: 930 hours
Actual rate: $ 19.90 per hour
Efficiency variance: Std rate (Std hours-Actual hours)
		21 (910- 930) = $ 420 Unfav
Req d:
Labour rate varianace= Actual hours (Std rate-Actual rate)
		930 hrs (21-19.90) = $ 1023 Fav
Req E:
Sstd variable OH per hour: $ 4
Actual variable oH rate epr hour: $ 4.20 per hour
Efficiency variance= Std OH rate per hour (Std hours-Actual houors)
		4.00 (910-930)= $ 80 Unfav
Req f:
Variable OH rate variance: Actual hours (Std rate-Actual rate)
		930 (4.00-4.20)= 186 Unfav