Question

Mark Ludwig, LLC manufactures drum sticks. During April 2018 the company produced 40,000 matched pairs of hickory drum sticks. The following information was available for the month. All material purchased in April was used in April production.

	Standard per Pair of Drum Sticks	Actual
Direct materials (hickory)	0.5 board feet @ $3.00 per board foot	$90,000 for 18,000 board feet
Direct labor	1.5 hours @ $10.00 per hour	$660,000 for 55,000 hours
Variable manufacturing overhead	1.5 hours @ $4.00 per direct labor hour	$220,000
Fixed manufacturing overhead	$131,250 for budgeted volume of 50,000 pairs of drum sticks and 75,000 hours, or $1.75 per hour	$100,000

Required

Calculate the direct materials price variance for April. Label the variance as favorable or unfavorable. (Unfavorable)

Calculate the direct materials quantity variance for April. Label the variance as favorable or unfavorable.(Favorable)

Calculate the direct labor rate variance for April. Label the variance as favorable or unfavorable.(Unfavorable)

Calculate the direct labor efficiency variance for April. Label the variance as favorable or unfavorable.(Favorable)

Calculate the variable overhead spending variance for April. Label the variance as favorable or unfavorable.(0)

Calculate the variable overhead efficiency variance for April. Label the variance as favorable or unfavorable. (Favorable)

Calculate the fixed overhead spending variance for April. Label the variance as favorable or unfavorable. (Favorable)

Calculate the overhead production volume variance for April. Label the variance as favorable or unfavorable. (Unfavorable)

Due to a shortage of hickory, the company had to pay a premium in order to acquire the hickory needed for April production. Discuss the impact of this decision on the variances experienced in April.

Need the last question explain.

Answer 1

Since, there are multiple sub-parts to the question, I have answered the first six.

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Part 1)

The formula for calculating direct material price variance is given as below:

Direct Material Price Variance = Actual Material Purchased*(Actual Rate Per Board Foot - Standard Rate Per Board Foot)

Using the values provided in the question, we get,

Direct Material Price Variance = 18,000*(90,000/18,000 - 3) = $36,000 (Unfavorable)

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Part 2)

The direct material efficiency variance is calculated as follows:

Direct Material Efficiency Variance = Standard Rate Per Board Foot*(Actual Material Used - Standard Material Used for Actual Production)

Using the values provided in the question, we get,

Direct Material Efficiency Variance = 3*(18,000 - 40,000*.50) = $6,000 (Favorable)

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Part 3)

The direct labor rate variance can be determined with the use of following formula:

Direct Labor Rate Variance = Actual Hours*(Actual Direct Labor Rate Per Hour - Standard Direct Labor Rate Per Hour)

Using the values provided in the question, we get,

Direct Labor Rate Variance = 55,000*(660,000/55,000 - 10) = $110,000 (Unfavorable)

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Part 4)

The value of direct labor efficiency is arrived as below:

Direct Labor Efficiency Variance = Standard Direct Labor Rate Per Hour*(Actual Hours - Standard Hours Used for Actual Production)

Using the values provided in the question, we get,

Direct Labor Efficiency Variance = 10*(55,000 - 40,000*1.50) = $50,000 (Favorable)

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Part 5)

The variable overhead spending variance is calculated below:

Variable Overhead Spending Variance = Actual Hours*(Actual Variable Manufacturing Overhead Rate Per Hour - Standard Variable Manufacturing Overhead Rate Per Hour)

Using the values provided in the question, we get,

Variable Overhead Spending Variance = 55,000*(220,000/55,000 - 4) = $0

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Part 6)

The value of variable overhead efficiency is arrived as below:

Variable Overhead Efficiency Variance = Standard Variable Manufacturing Overhead Rate Per Hour*(Actual Hours - Standard Hours Used for Actual Production)

Using the values provided in the question, we get,

Variable Overhead Efficiency Variance = 4*(55,000 - 40,000*1.50) = $20,000 (Favorable)