Question

Hawley Inc. manufactures designer iPod cases for national distribution. The standard costs for the manufacture of designer iPod cases were as follows:

Standard Costs Actual Costs

Direct materials 1,500 lbs. at $35 1,600 lbs. at $32

Direct labor 4,800 hrs. at $11 4,500 hrs. at $11.80

Factory overhead Rates per labor hour, based on 100% of normal capacity of 5,500 labor hrs.:

Variable cost, $2.40 $12,300 variable cost

Fixed cost, $3.50 $19,250 fixed cost

Instructions

1. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance for the designer iPod cases.

2. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance for the designer iPod cases.

3. Determine the variable factory overhead controllable variance, fixed factory overhead volume

variance, and total factory overhead cost variance for the designer iPod cases.

Answer 1

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		Standard Quantity (SQ)	Standard Price (SP)	Standard Unit Cost
Direct Material		1500	35	52500
Direct Labor		4800	11	52800
	Actual Quantity		Actual Rate (AP) Given	Actual Cost
Direct Material	1600	1600	32	51200
Direct Labor	4500	4500	11.8	53100
Direct Material Price Variance	(SP-AP)*AQ	(35-32)*1600	4800	Favorable
Direct Material Quantity Variance	(SQ-AQ)*SP	(1500-1600)*35	-3500	Unfavorable
Total Material Variance	Price Var+Quantity Var		1300	Favorable
Direct Labor Rate Variance	(SP-AP)*AQ	(11-11.8)*4500	-3600	Unfavorable
Direct Labor Efficiency Variance	(SQ-AQ)*SP	(4800-4500)*11	3300	Favorable
Total Labor Variance	Price Var+Quantity Var		-300	Unfavorable
Controllable Variable Ovrhead Variance:	11520-12300= 780 U
Fixed Overhead Volume Variance:	(5500-4800)*3.5=2450 U
Total Overhead Variance:	780+2450=3230 U