Question

Fortes Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.

Inputs	Standard Quantity or Hours per Unit of Output			Standard Price or Rate
Direct materials		8.5	ounces	$	6.60	per ounce
Direct labor		0.6	hours	$	24.80	per hour
Variable manufacturing overhead		0.60	hours	$	4.90	per hour

The company has reported the following actual results for the product for April:

Actual output				6100	units
Raw materials purchased				48,700	ounces
Actual cost of raw materials purchased	$			303,010
Raw materials used in production				51,860	ounces
Actual direct labor-hours				3360	hours
Actual direct labor cost	$			86,810
Actual variable overhead cost		$	15,717
Required: Materials price variance $ Materials quantity variance $ Labor rate variance $ Labor efficiency variance $ Variable overhead rate variance $ Variable overhead efficiency variance $

Answer 1

Materials price variance = (Actual quantity * Actual price) - (Actual quantity purchased * Standard price)

= 303,010 - (48,700 * $6.6)

= $18,410 Favorable

Materials quantity variance = (Actual quantity used * Standard price) - (Standard quantity * Standard price)

= (51,860 * $6.6) - [(6,100 * 8.5) * $6.6]

= $342,276 - $342,210

= $66 Unfavorable

Labor rate variance = (Actual hours * Actual rate) - (Actual hours * Standard rate)

= $86,810 - (3,360 * $24.8)

= $3,482 Unfavorable

Labor efficiency variance = (Actual hours * Standard rate) - (Standard hours * Standard rate)

= (3,360 * $24.8) - [(6,100 * 0.6) * $24.8]

= $83,328 - $90,768

= $7,440 Favorable

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

= $15,717 - (3,360 * $4.9)

= $747 Favorable

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

= (3,360 * $4.9) - [(6,100 * 0.6) * $4.9]

= $16,464 - $17,934

= $1,470 Favorable