Question

Variance Company produces Chemical Y. It budgeted to produce 10,000 gallons of Chemical Y in fiscal year 2006. It actually produced 11,000 gallons. The production process for Chemical Y has two principal ingredients, Mystery Material M and labor. To produce 1 gallon of Chemical Y under budget requires 10 gallons of Mystery Material M @ $3/gallon and .5 labor hours @$20/labor hour. During 2006, it spent $346,500 to purchase 99,000 gallons of Mystery Material M that Variance Company used in production. Its actual total labor costs were $115,000 and it used 5,000 hours of labor

What is the labor volume variance?

A) $15,000 B) $10,000 C) $5,000 D) $500

5. What is the labor efficiency variance?

A) $15,000 B) $10,000 C) $5,000 D) $500

What is the flexible budget variance for mystery material M for the year 2006?

A) $16,500 B) $30,000 C) $10,000 D) $46,500

8. What is the price variance for mystery material M for the year 2006?

A) $33,000 B) $30,000 C) $49,500 D) $50,000

Answer 1

4)labor volume variance = SR [AH-SH]

                           = 20 [5000- (11000*.5)]

                           = 20[5000- 5500]

                          = 20 * -500

                          = - 10000 F

correct option is "B"

5)correct option is "B" -10000   [since labor volume variance also called labor efficiency variance]

6) Flexible Budget variance for Mystery material = Actual cost - [Actual units *SQ per unit *SR]

                               = 346500- [11000*10*3]

                              = 346500 - 330000

                               = 16500 U

Correct option is "A"

8)price variance for mystery material M = ACual cost -[AQ*SR]

                                         = 346500 - [99000*3]

                                         = 346500 -297000

                                       = 49500 U

Correct option is "c"