Question

Question 4

A.(i) Moment Inc. provides the following data for June 2016 when 15,000 Units are manufactured:

Standard Material Cost (Per Unit)

8.50 kg @ $ 7.50/kg

Actual Material Cost (Per Unit)

6.75 kg @ $ 13.5/kg

StandardLabor cost (Per Unit)

5.5 hrs @ $ 15/hr

Actual Labor cost (Per Unit)

6.5 hrs @ $ 12.2/hr

Calculate:

             Direct Material Price Variance

             Direct Material Quantity/Usage Variance

              Total Material Cost Variance

              Direct Labor Rate Variance

             Direct Labor Efficiency Variance

              Total Labor Cost Variance

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(ii) Calculate Variable Overhead Spending Variance if actual labor hours used are 260,standard variable overhead rate is $10.40 per direct labor hour and actual variable overhead rate is $9.30 per direct labor hour. Also specify whether the variance is favorable or unfavorable.

(iii) Calculate the variable overhead efficiency variance using the following figures:

Number of Units Produced	620
Standard Direct Labor Hours Per Unit	0.2
Actual Direct Labor Hours Used	260
Standard Variable Overhead Rate	$10.40

Kindly, requesting you to solve this question with a clear explanation. Due to the Covid-19 our assignments online basis.

Answer 1

(i)

Direct Material variances:

(1)	(2)	(3)
SQ*SP	AQ*AP	AQ*SP
Standard Quantity allowed for Actual output at standard price	Actual Quantity of Input at actual price	Actual Quantity of Input at standard price
127,500 kg * $7.5 per kg	6.75 kg per unit * 15,000 units * $13.5 per kg	6.75 kg per unit * 15,000 units * $7.5 per kg
$                                      956,250	$                           1,366,875	$               759,375
Workings
SQ	SQ for Actual output
	= 8.5 kg * 15,000 units
SQ	127,500
Direct Material Variances
Direct Material Price variance	(3)-(2)	(607,500)	Unfavorable
Direct Material Quantity/ usage variance	(1)-(3)	196,875	Favorable
Total Material cost variance	(1)-(2)	(410,625)	Unfavorable

Direct Labor variances:

(1)	(2)	(3)
SH*SR	AH*AR	AH*SR
Standard Hours allowed for Actual output at standard rate	Actual Hours of Input at actual rate	Actual Hours of Input at standard rate
82,500 hours * $15 per hour	6.5 hours per unit * 15,000 units * $12.20 per hour	6.5 hours per unit * 15,000 units * $15 per hour
$                              1,237,500	$                  1,189,500	$                  1,462,500
Workings
SH	SH for Actual output
	= 5.5 hours per unit * 15,000 units
SH	82,500
Direct Labor Variances
Direct Labor Rate variance	(3)-(2)	273,000	Favorable
Direct Labor Efficiency variance	(1)-(3)	(225,000)	Unfavorable
Total Labour cost variance	(1)-(2)	48,000	Favorable

(ii)
Variable overhead variances:

(1)	(2)	(3)
SH*SR	AH*AR	AH*SR
Standard Hours allowed for Actual output at standard rate	Actual Hours of Input at actual rate	Actual Hours of Input at standard rate
124 hours * $10.4 per direct labor hour	260 hours * $9.3 per direct labor hour	260 hours * $10.40 per direct labor hour
$                          1,290	$                                   2,418	$                  2,704
Workings
SH	SH for Actual output
	= 0.2 hours per unit * 620 units
SH	124
Variable overhead - variances
Variable overhead Rate variance	(3)-(2)	286	Favorable
Variable overhead Efficiency variance	(1)-(3)	(1,414)	Unfavorable
Variable overhead Spending variance (Total Variable overhead cost variance)	(1)-(2)	(1,128)	Unfavorable