Question

Rip Tide Company manufactures surfboards. Its standard cost information follows: Direct materials (fiberglass) Direct labor Variable manufacturing overhead (based on direct labor hours) Fixed manufacturing overhead ($24,000 300 units) Standard Quantity 15 sq. ft. 10 hrs. 10 hrs. Standard Price (Rate) $ 5 per sq. ft. $15 per hr. $ 6 per hr. Standard Unit Cost $ 75.00 150.00 60.00 80.00 Rip Tide has the following actual results for the month of June: Number of units produced and sold Number of square feet of fiberglass used Cost of fiberglass used Number of labor hours worked Direct labor cost Variable overhead cost Fixed overhead cost 327 5,070 $28,392 3,210 $50,076 $14,290 $20,000 Required: 1. Calculate the direct materials price, quantity, and total spending variances for Rip Tide. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.) Direct Materials Price Variance Direct Materials Quantity Variance Direct Materials Spending Variance 2. Calculate the direct labor rate, efficiency, and total spending variances for Rip Tide. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.) Direct Labor Rate Variance Direct Labor Efficiency Variance Direct Labor Spending Variance

Answer 1

Answers

• Working

Actual DATA for		327	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	5070	$                   5.60	$           28,392.00
Direct labor	3210	$                15.60	$           50,076.00

Standard DATA for		327	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 15 sq ft x 327 units)=4905 sq ft	$                   5.00	$       24,525.00
Direct labor	( 10 hours x 327 units)=3270 hours	$                15.00	$       49,050.00

• Requirement 1, with calculation

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                                5.00	-	$                       5.60	)	x	5070
	-3042
	Variance		$              3,042.00			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	4905	-	5070	)	x	$                           5.00
	-825
	Variance		$                  825.00			Unfavourable-U
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$                      24,525.00	-	$            28,392.00	)
	-3867
	Variance		$              3,867.00			Unfavourable-U

• Requirement 2, with calculations

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                              15.00	-	$                    15.60	)	x	3210
	-1926
	Variance		$              1,926.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	3270	-	3210	)	x	$                        15.00
	900
	Variance		$                  900.00			Favourable-F
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$                      49,050.00	-	$            50,076.00	)
	-1026
	Variance		$              1,026.00			Unfavourable-U