Question

Orville Company’s standard and actual costs per unit are provided below for the most recent period. During this time period 1200 units were actually produced.

	Standard	Actual
Materials:
Standard: 2-6 metres at $2.30 per m.	$5.98
Actual: 2.1 metres at $2.60 per m.		$5.46
Direct labour:
Standard: 2.2 hrs. at $7.90 per hr.	17.38
Actual: 1.7 hrs. at $8.50 per hr.		14.45
Variable overhead:
Standard: 2.2 hrs. at $4.60 per hr.	10.12
Actual: 1.7 hrs. at $4.20 per hr.		7.14
Total unit cost	$33.48	$27,05

For simplicity, assume there was no inventory of materials at the beginning or end of the period.

Required:

Given the information above, compute the following variances. Also indicate if the variances are favorable or unfavorable.

1. Materials price variance

2. Materials quantity variance

3. Direct labour rate variance   

4. Direct labour efficiency variance   

5. Variable overhead efficiency variance   

                     6.        Variable overhead spending variance  

Answer 1

Std qty allowed	3120
Actual qty	2520
Std price		2.3
Actual price	2.6
Material price variance = Actual qty (Std price-Actual price)
		2520 (2.30-2.60) = 756 Unfav
Material Qty variance = Std price (Std qty-Actual qty)
		2.30 (3120-2520) = 1380 Fav
Std hourss	2640
Actual hours	2040
Std rate		7.9
Actual rate	8.5
Labour rate variance = Actual hours (Std rate -Actual rate)
		2040 (7.90-8.50) = 1224 Unfav
Labour efficiency variance = Std rate (Std hours-Actual hours)
		7.90 (2640-2040 ) = 4740 Fav
Std Oh rate	4.6
Actual oh rate	4
Variable Oh efficiency variance = Std Oh rate (Std hours-Actual hours)
			4.60 (2640-2040)= 2760 Fav
Variable Oh spending variance = Std oh rate*Std hours - Actual hours*Actual oh rate
			4.60*2640 - 2040*4 =3984 Fav