Question

The following data reflect the current month's activity for Sills, Inc.:

  

Actual total direct labor	$	184,080
Actual hours worked		13,000
Standard labor-hours allowed for actual output (flexible budget)		14,400
Direct labor price variance	$	4,680	U
Actual variable overhead	$	45,500
Standard variable overhead rate per standard direct labor-hour	$	3.60

Variable overhead is applied based on standard direct labor-hours allowed.

  

Required:

Compute the labor and variable overhead price and efficiency variances. (Do not round your intermediate calculations. Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)

  

	Price Variance		Efficiency Variance
Direct labor	$	(Click to select)FUNone	$	(Click to select)NoneUF
Variable overhead	$	(Click to select)UNoneF	$	(Click to select)UNoneF

Answer 1

Ans. 1. Calculation of Labor variance

Actual labor hours rate = 184080/13000 = 14.16 per hour

Direct labor price variance = (Std. rateXactual hours )-(actual hours X actual rate)

(4680) = (Std. labor cost)-(Actual labor cost )

(4680) = (Std.labor cost)-(184080)

Std. labor cost = 179400

Actual hours = 13000

Std. Rate per direct labor hours = 179400/13000 = 13.80 per hour

Direct labor price variance = 179400-184080 = 4680(U)

Direct labor efficiency variance = (std.labors hoursXstd. rate per hour)-(actual hoursXstd. rate per hours)

                                                        = (14400X13.80)-(13000X13.80) = 19320(F)

Calculation of variable overhead variance

Actual variable overhead rate = 45500/13000 = $3.5 per hours

variable overhead price variance = (std.rateXactual hours)-(actual variable o/h)

                                                            = (3.60X13000)-(45500) = 1300(F)

Variable overhead efficiency variance = (std.hoursXstd.rate)-(actual hoursXstd.rate)

                                                                    = (14400X3.60)-(13000X3.60) = 5040(F)

                                                                          Variance table

                                                    Price variance                                                   Efficiency variance

Direct labor                                  4680(UF)                                                           19320(F)

Variable overhead                       1300(F)                                                              5040(F)