Question

May I please get help understanding how to solve these problems? Thank you!

Variance Problem Standard Quantity Standard Cost Standard price per unit $7.00 per unit Direct Materials Direct Labor Variable Overhead $1.75 per hr $11.50 per hr $5.00 per hr 4 $13.80 1.2 $6.00 1.2 Manufacturing overhead is applied using direct labor hours as the base. During the month of July, XYZ company had the following information available about production: a. 9,000 units were produced b. 37,000 lbs of raw materials were purchased at a cost of $62,900 c. There was no beginning inventory and no ending inventory of raw materials d. 10,500 hours of direct labor were used during the month at a cost of $119,175 e. Variable overhead cost in July totaled $57,750 Compute the following and verify the total variance for each component of product cost: 1. Material price variance, Material quantity variance, and Total material variance 2. Labor rate variance, Labor efficiency variance, and Total labor variance 3. Variable Overhead spending variance, Variable Overhead efficiency variance, and Total Variable Overhead variance

Answer 1

1) Material price variance = (1.75*37000-62900) = 1850 F

material quantity variance = (9000*4-37000)*1.75 = 1750 U

Total material variance = (9000*7-62900) = 100 F

2) Labor rate variance = (11.50*10500-119175) = 1575 F

Labor efficiency variance = (9000*1.2-10500)*11.50 = 3450 F

Total labor variance = (9000*13.80-119175) = 5025 F

3) variable overhead rate variance = (5*10500-57750) = 5250 U

Variable overhead efficiency variance = (9000*1.2-10500)*5 = 1500 F

Total variable overhead variance = (9000*6-57750) = 3750 U