Question

Marx Products operates a small plant in New Mexico that produces dog food in batches of 1,500 pounds. The product sells for $6 per pound. Standard costs for 2021 are:

Standard direct labor cost = $15 per hour
Standard direct labor hours per batch = 10 hours
Standard price of material A = $0.35 per pound
Standard pounds of material A per batch = 734 pounds
Standard price of material B = $0.55 per pound
Standard pounds of material B per batch = 260 pounds
Fixed overhead cost per batch = $450

At the start of 2021, the company estimated monthly production and sales of 54 batches. The company estimated that all overhead costs were fixed and amounted to $25,000 per month. During the month of June 2021 (typically a somewhat slow month), 39 batches were produced (not an unusual level of production for June). The following costs were incurred:

Direct labor costs were $7,120 for 440 hours.
36,100 pounds of material A costing $8,303 were purchased and used.
11,100 pounds of material B costing $5,772 were purchased and used.
Fixed overhead of $24,600 was incurred.

Calculate variances for material, labor, and overhead. (Round intermediate calculations to 2 decimal places, e.g. 1.62 and final answers to 0 decimal places, e.g. 125. Enter all variances as a positive number.)

Material Price Variance (Material A)			$enter a dollar amount		select an option                                                                      UnfavorableNeither Unfavorable nor FavorableFavorable
Material Price Variance (Material B)			$enter a dollar amount		select an option                                                                      UnfavorableFavorableNeither Unfavorable nor Favorable
Material Quantity Variance (Material A)			$enter a dollar amount		select an option                                                                      UnfavorableFavorableNeither Unfavorable nor Favorable
Material Quantity Variance (Material B)			$enter a dollar amount		select an option                                                                      UnfavorableNeither Unfavorable nor FavorableFavorable
Labor Rate Variance			$enter a dollar amount		select an option                                                                      Neither Unfavorable nor FavorableUnfavorableFavorable
Labor Efficiency Variance			$enter a dollar amount		select an option                                                                      FavorableUnfavorableNeither Unfavorable nor Favorable
Controllable Overhead Variance			$enter a dollar amount		select an option                                                                      Neither Unfavorable nor FavorableUnfavorableFavorable
Overhead Volume Variance			$enter a dollar amount		select an option                                                                      FavorableUnfavorableNeither Unfavorable nor Favorable

Prepare a summary of the variances. (Enter unfavorable variances using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Material Price Variance (Material A)			$enter a dollar amount
Material Price Variance (Material B)			enter a dollar amount
Material Quantity Variance (Material A)			enter a dollar amount
Material Quantity Variance (Material B)			enter a dollar amount
Labor Rate Variance			enter a dollar amount
Labor Efficiency Variance			enter a dollar amount
Controllable Overhead Variance			enter a dollar amount
Overhead Volume Variance			enter a dollar amount
	Total		$enter a total amount

Does the unfavorable overhead volume variance suggest that overhead costs are out of control?

The overhead volume variance select an option                                                                      suggestsdoes not suggest that overhead costs are out of control.

Answer 1

- Material Price Variance = (Actual price - standard price)*Actual quantity used

Actual Price (Material A) = $8,303/36,100 = .23

Actual Price (Material B) = $5,772/11,100 = .52

Material Price Variance (Material A) = (.23 - .35)*36,100 = 4,332 Favorable

Material Price Variance (Material B) = (.52 - .55)*11,100 = 333 Favorable.

- Material Quantity Variance = (Actual quantity - Standard quantity allowed)*Standard price

Material Quantity Variance (Material A) = (36,100 - 28,626)*.35 = 2,616 Unfavorable

Material Quantity Variance (Material B) = (11,100 - 10,140)*.55 = 528 Unfavorable.

- Labor Rate Variance = (Actual rate - Standard rate)* Actual hours used

Labor Rate Variance = (16.18 - 15)* 440 = 520 Unfavorable.

- Labor Efficiency Variance = (Actual hours - Standard hours allowed)* standard rate

Labor Efficiency Variance = (440 - 390)* 15 = 750 Unfavorable.

- Controllable Overhead Variance = Actual overhead - Budgeted overhead

Controllable Overhead Variance = 24,600 - 25,000 = 400 Favorable.

- Overhead Volume Variance = Budgeted overhead - Overhead applied

Overhead Volume Variance = 25,000 - 17,550 = 7,450 Unfavorable.