Question

Question 3 Rogen Corporation manufactures a single product. The standard cost per unit of product is shown below. Direct materials-1 pound plastic at $6.00 per pound Direct labor-0.5 hours at $11.90 per hour Variable manufacturing overhead Fixed manufacturing overhead Total standard cost per unit 6.00 5.95 3.00 5.00 $19.95 The predetermined manufacturing overhead rate is $16.00 per direct labor hour ($8.00 – 0.5). It was computed from a master manufacturing overhead budget based on bor hours (5,200 units) for the month. The master budget showed total variable costs of $15,600 ($6.00 per hour) and total fixed overhead costs of $26,000 ($10.00 per hour). Actual costs for October in producing 3,000 units were as follows. Direct materials (3,190 pounds) Direct labor (1,390 hours) Variable overhead Fixed overhead Total manufacturing costs $ 19,459 17,097 18,238 7,562 $62,356 The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored. (a) Compute all of the materials and labor variances. Total materials variance Materials price variance Materials quantity variance

Answer 1

a)

Total material variance =(Std hours allowed*Std rate)-Actual cost(= (3000*6)-19,459 = 1459 Unfavorable

Material price variance = (Actual qty*standard rate)-(Actual Qty*Actual rate)-=(6*3190-19,459) = 319 Unfavorable

Material quantity variance = Std rate*(Actual Qty-std qty allowed)=(3190-3000)*6 = 1140 Unfavorable

Total labour variance = (std hours allowed*std rate)-Actual cost=(3000*0.50*11.90)-17,097 = 753 Favorable

Labour rate variance = (Actual hours*Actual rate)-(Actual hours *std rate)=17,097-(11.90*1390)-17,097 = 556 Unfavorable

Labour efficiency variance =Std rate*(Actual hours-std hours allowed)= (1500-1390)*11.90 = 1309 Favorable

b)

Total overhead variance = Actual overhead-(std hours allowed* std rate)= (18238+7562)-(3000*0.5*16)-=24000-25800 = 1800 Unfavorable