Question

LO 2, 4, 6, 7) Carson Construction Consultants performs cement core tests in its Greenville laboratory. The following standard costs for the tests have been developed by the company's controller, Landon Carson, based on performing 2,100 core tests per month. Standard Price Standard Quantity Standard Cost Direct materials $0.50 per pound    4 pounds $ 2.00 Direct labor $10 per DLH   .5 DLH   5.00 Variable overhead $9 per DLH   .5 DLH   4.50 Fixed overhead $16 per DLH   .5 DLH   8.00 Total standard cost per test $19.50 At the end of March, London reported the following operational results: •The company actually performed 2,250 core tests during the month. •8,500 pounds of direct materials were purchased during the month at a total cost of $5,600. •6,300 pounds of direct materials were used to conduct the core tests. •850 direct labor hours were worked at a total cost of $9,775. •Actual variable overhead was $7,800. •Actual fixed overhead was $15,750. Required (a) Calculate the direct materials price variance for March. (b) Calculate the direct materials quantity variance for March. (c) Calculate the direct labor rate variance for March. (d) Calculate the direct labor efficiency variance for March. (e) Calculate the variable overhead spending variance for March. (f) Calculate the variable overhead efficiency variance for March. (g) Calculate the fixed overhead spending variance for March. (h) Prepare a memo to Landon Carson providing possible explanations for the direct materials and direct labor variances.

Answer 1

a) Actual price per pound = $5,600/8,500 = 0.66

Direct material price variance = (Standard Price - Actual Price)*Actual units consumed

= ($0.50 - $0.65882353)*6,300 = ($1,001) Unfavorable

b) Standard units = 2,250 cuts*4 pounds = 9,000 pounds

Direct Material Quantity Variance = (Standard units - Actual units)*Standard price

= (9,000 units - 6,300 units)*$0.50 = $1,350 Favorable

c) Actual rate per hour = $9,775/850 = $11.50 per DLH

Direct labor rate variance = (Standard Rate - Actual Rate)*Actual Hours

= ($10.00 - $11.50)*850 hrs = ($1,275) Unfavorable

d) Standard hours = 2,250 cuts*0.50 DLH = 1,125 hours

Direct labor efficiency variance = (Standard hours - Actual hours)*Standard rate

= (1,125 units - 850 units)*$10 = $2,750 Favorable

e) Actual variable overhead rate per hour = $7,800/850 = $9.1764706 per DLH

Variable overhead spending variance = (Standard Rate - Actual Rate)*Actual Hours

= ($9.00 - $9.1764706)*850 hrs = ($150) Unfavorable

f) Standard hours = 2,250 cuts*0.50 DLH = 1,125 hours

Variable overhead efficiency variance = (Standard hours - Actual hours)*Standard rate

= (1,125 units - 850 units)*$9 = $2,475 Favorable