Question

In: Accounting

A company’s standard cost information for last year follows: Standard Quantity Standard Price Rate Standard Unit...

  1. A company’s standard cost information for last year follows:

Standard Quantity

Standard Price Rate

Standard Unit Cost

Direct materials

1.5 lbs.

$1.75 per lb.

$3.05

Direct labor

1.5 hrs.

$10 per hr.

$16.00

Variable manufacturing overhead (based on DL hrs)

1.5 hrs.

$1.25 per hr.

$2.38

The company had the following actual results for the past year:

Number of units produced and sold

175,000

Number of pounds of raw materials used

310,000

Cost of raw materials

$496,000

Number of labor hours worked

200,000

Direct Labor Cost

$1,500,000

Variable overhead cost

$350,000
  1. Direct Materials Price Variance
  1. Direct Materials Quantity Variance: =
  1. Total Direct Materials Spending Variance
  1. Direct Labor Rate Variance
  1. Direct Labor Efficiency Variance
  1. Total Direct Labor Spending Variance
  1. Variable Overhead Rate Variance
  1. Variable Overhead Efficiency
  1. Variable Overhead Spending Variance

Solutions

Expert Solution

  • Working

Actual DATA for

175000

units

Quantity (AQ)

Rate (AR)

Actual Cost

Direct Material

310000

$                   1.60

$        496,000.00

Direct labor

200000

$                   7.50

$     1,500,000.00

Variable Overhead

200000

$                   1.75

$        350,000.00

Standard DATA for

175000

units

Quantity (SQ)

Rate (SR)

Standard Cost

[A]

[B]

[A x B]

Direct Material

( 1.5 lbs x 175000 units)=262500 lbs

$                   1.75

$     459,375.00

Direct labor

( 1.5 hours x 175000 units)=262500 hours

$                10.00

$ 2,625,000.00

Variable Overhead

( 1.5 hours x 175000 units)=262500 hours

$                   1.25

$     328,125.00

  • Requirements

[1]

Material Price Variance

(

Standard Rate

-

Actual Rate

)

x

Actual Quantity

(

$                                1.75

-

$                       1.60

)

x

310000

46500

Variance

$            46,500.00

Favourable-F

Material Quantity Variance

(

Standard Quantity

-

Actual Quantity

)

x

Standard Rate

(

262500

-

310000

)

x

$                           1.75

-83125

Variance

$            83,125.00

Unfavourable-U

Material Spending Variance

(

Standard Cost

-

Actual Cost

)

(

$                   459,375.00

-

$          496,000.00

)

-36625

Variance

$            36,625.00

Unfavourable-U

[2]

Labor Rate Variance

(

Standard Rate

-

Actual Rate

)

x

Actual Labor Hours

(

$                              10.00

-

$                       7.50

)

x

200000

500000

Variance

$          500,000.00

Favourable-F

Labour Efficiency Variance

(

Standard Hours

-

Actual Hours

)

x

Standard Rate

(

262500

-

200000

)

x

$                        10.00

625000

Variance

$          625,000.00

Favourable-F

Labor Spending Variance

(

Standard Cost

-

Actual Cost

)

(

$                2,625,000.00

-

$      1,500,000.00

)

1125000

Variance

$      1,125,000.00

Favourable-F

[3]

Variable Overhead Rate Variance

(

Standard Rate

-

Actual Rate

)

x

Actual Labor Hours

(

$                                1.25

-

$                       1.75

)

x

200000

-100000

Variance

$          100,000.00

Unfavourable-U

Variable Overhead Efficiency Variance

(

Standard Hours

-

Actual Hours

)

x

Standard Rate

(

262500

-

200000

)

x

$                           1.25

78125

Variance

$            78,125.00

Favourable-F

Variable Overhead Spending Variance

(

Standard Cost

-

Actual Cost

)

(

$                   328,125.00

-

$          350,000.00

)

-21875

Variance

$            21,875.00

Unfavourable-U

ekkarill92 answered 8 months ago
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