Question

Problem 16-64 Comprehensive Variance Problem (LO 16 - 5, 6)

The standard cost sheet for Chambers Company, which manufactures one product, follows:
   

Direct materials, 40 yards at $3.00 per yard	$	120
Direct labor, 5 hours at $30 per hour		150
Factory overhead applied at 70% of direct labor		105
(variable costs = $70; fixed costs = $35)
Variable selling and administrative		74
Fixed selling and administrative		50
Total unit costs	$	499

  
Standards have been computed based on a master budget activity level of 29,800 direct labor-hours per month. Actual activity for the past month was as follows:  
  

Materials used		238,000	yards at $3.15 per yard
Direct labor		28,100	hours at $31.00 per hour
Total factory overhead	$	650,000
Production		5,500	units

  
Required:

Prepare variance analyses for the variable and fixed costs. Materials are purchased as they are used. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

	Direct materials: Price variance Efficiency variance Direct labor: Price variance Efficiency variance Variable overhead: Efficiency variance Fixed overhead: Production volume variance

Answer 1

		Direct materials, 40 yards at $3.00 per yard	$120
		Direct labor, 5 hours at $30 per hour	$150
		Factory overhead applied at 70% of direct labor	$105
		(variable costs = $70; fixed costs = $35)
		Variable selling and administrative	$74
		Fixed selling and administrative	$50
		Total unit costs	$499
	SP	Standard material Price per yard	$3
	SQ	Standard quantity of material for actual production(yards)	220,000	(5500*40)
	SR	Standard Labor Rate per hour	$30
	SH	Standard Labor Hour for actual production	27,500	(5500*5)
	SVR	Standard variable Overhead Rate per hour	$14	(70/5)
	FOAR	Fixed Overhead absorption rate per unit	$35
	AU	Actual Output in units	5,500
	BU	Budgeted output in units	5960	(29800/5)
		ACTUALS:
	AP	Actual material Price per yard	$3.15
	AQ	Actual quantity of material for actual production(yards)	238,000
	AR	Actual Labor Rate per hour	$31
	AH	Actual Labor Hour for actual production	28,100
	AQ*(SP-AP)	Direct material Price Variance	($35,700.00)	Unfavourable
	SP*(SQ-AQ)	Direct material Efficiency Variance	(54,000)	Unfavourable
	AH*(SR-AR)	Direct labor Price Variance	($28,100)	Unfavourable
	SR*(SH-AH)	Direct labor Efficiency Variance	(18,000)	Unfavourable
	SVR*(SH-AH)	Variable overhead Efficiency Variance	(8,400)	Unfavourable
	FOAR*(AU-BU)	Fixed Overhead Volume Variance	($16,100)	Unfavourable
		Direct materials:
		Price variance	$35,700.00	Unfavourable
		Efficiency variance	54,000	Unfavourable
		Direct labor:
		Price variance	$28,100	Unfavourable
		Efficiency variance	18,000	Unfavourable
		Variable overhead:
		Efficiency variance	8,400	Unfavourable
		Fixed overhead:
		Production volume variance	$16,100	Unfavourable