Question

Exercise 16-39 (Static) Variable Cost Variances (LO 16-5) The records of Norton, Inc. show the following for July. 1.2 Standard labor-hours allowed per unit of output Standard variable overhead rate per standard direct labor hour Good units produced Actual direct labor-hours worked Actual total direct labor Direct labor efficiency variance Actual variable overhead 60, eee 73,600 $2,370,000 $ 48, eee U $3,072, eee Required: Compute the direct labor and variable overhead price and efficiency variances. (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 labor Price variance Efficiency variance Variable overhead Price variance < Prev 19 of 23 !!! Next > to search (?

Answer 1

Direct labor efficiency variance = (Actual hours * Standard rate) - (Standard hours * Standard rate)

$48,000 = (73,600 * Standard rate) - [(60,000*1.2) * Standard rate]

$48,000 = (73,600 * Standard rate) - (72,0000 * Standard rate)

$48,000 = Standard rate * (73,600 - 72,000)

Standard rate = $48,000 / 1,600

= $30

Direct labor price variance = (Actual hours * Actual rate) - (Actual hours * Standard rate)

= $2,370,000 - (73,600 * $30)

= $162,000 Unfavorable

Direct labor efficiency variance = (Actual hours * Standard rate) - (Standard hours * Standard rate)

= (73,600 * $30) - [(60,000*1.2 * $30]

= $2,208,000 - $2,160,000

= $48,000 Unfavorable

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

= $3,072,000 - (73,600 * $45)

= $240,000 Favorable

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

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

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

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

The variable overhead rate variance = Actual overhead - (Actual hours * Standard rate)