Question

High End Crockery Corp set the following standards for their pottery bowls:

	Std Qty or Hrs		Std Rate or Price
Direct materials	5.5	lbs per bowl	$6.50	per lb
Direct labor	.4	hrs per bowl	$22.50	per hour
Variable Overhead	.4	hrs per bowl	$2.50	per hour

The actual results ae as follows:

Actual output	8,250	units
Raw materials purchased	45,900	lbs
Raw materials used in production	44,750	lbs
Actual price raw materials	$6.25	per lb
Actual direct labor hours	3,200	hours
Actual direct labor rate	$22.75	per hour
Actual variable overhead rate	$2.00	per hour What is the materials price variance? Is the materials price variance favorable or unfavorable? Indicate F or U as your answer What is the materials quantity variance? Is the materials quantity variance favorable or unfavorable? Indicate F or U as your answer What is the labor rate variance? Is the labor rate variance favorable or unfavorable? Indicate F or U as your answer What is the labor efficiency variance? Is the labor efficiency variance favorable or unfavorable? Indicate F or U as your answer What is the variable overhead rate variance? Is the variable overhead rate favorable or unfavorable? Indicate F or U as your answer What is the variable overhead efficiency variance? Is the variable overhead efficiency variance favorable or unfavorable? Indicate F or U as your answer

Answer 1

Workings:

Standard data for actual output:

Standard price = $6.50

Standard quantity = 8250*5.50 = 45375 lbs

Actual price = $6.25

Actual quantity = 44750 lbs

Standard Rate = $22.5

Actual Rate = $22.75

Standard hours = 8250*.4 = 3300 hours

Actual hours = 3200 hours

Standard variable overhead Rate = $2.50

Actual variable overhead Rate = $2.00

Solutions:

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

=(6.50 - 6.25)*44750 = 11187.5 F

Material quantity variance = (Standard quantity - Actual quantity)*Standard price

=(45375-44750)*$6.5 = 4062.5 F

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

=(22.50 - 22.75)*3200 = 800 U

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

=(3300 - 3200)*$22.50 = $2250 F

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

=(2.50 - 2.00)*3200 = 1600 F

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

=(3300 - 3200)*$2.50 = 250 F