Question

Material, Labor, and Variable Overhead Variances The following summarized manufacturing data relate to Steffan Corporation's April operations, during which 2,000 finished units of product were produced. Normal monthly capacity is 1,100 direct labor hours. Standard Units Costs Total Actual Costs Direct material Standard (2 lb. @ $9.50/lb.) $19 Actual (4,200 lb. @ $10.20/lb.) $42,840 Direct labor Standard (0.5 hr. @ $24/hr.) $12 Actual (970 hrs. @ $23.40/hr.) 22,698 Variable overhead Standard (0.5 hr. @ $6/hr.) Actual 6,200 Total $71,738 Assume that the 4,200 lb. of materials purchased were all used in producing the 2,000 completed units. Determine the materials price and efficiency variances, labor rate and efficiency variances, and variable overhead spending and efficiency variances. Materials Variances Actual cost: Split cost: Standard cost: $ Materials price Materials efficiency $ Labor Variances Actual cost: $ Split cost: Standard cost: $ Labor rate Labor efficiency $

Answer 1

a) Actual cost: Material Variances $42,840 $38,000 $39,900 $2,940 Unfavorable [4200 Ibs x ($9.5 - $10.2)] $1,900 Unfavorable [(4200 - (2000 units x 2 Ibs)) x $9.5] [Given] Split cost: Standard cost: [2000 units x 2 Ibs x $9.5] [4200 Ibs x $9.5] Materials price: Materials efficiency: Material price variance is unfavorable as actual price per Ib is higher than standar price per Ib. Material efficiency variance is unfavorable as actual Ibs used is higher than standard Ibs required for actual units produced. b) Labor Variances Actual cost: $22,698 $24,000 $23,280 $582 Favorable [970 hours x $23.4] [2000 units x 0.5 hours x $24] [970 hours x $24] [970 hours x ($24 - $23.4)] [(970 - (2000 units x 0.5 hours)) × $24] Split cost: Standard cost: Labor rate: Labor efficiency: $720 Favorable Labor rate variance is favorable as actual rate per hour is less than standar rate per hour. Labor efficiency variance is favorable as actual hours used is less than standard hours required for actual units produced.

c) Variable overhead Variances $6,200 $6,000 $5,820 $380 Unfavorable [(970 hours x $6) - $6200] Actual cost: [Given] [2000 units x 0.5 hours x $6] [970 hours x $6] Split cost: Standard cost: Variable OH rate: Variable OH efficiency: $180 Favorable [(970 - (2000 units x 0.5 hours)) x $6] Variable OH rate variance is unfavorable as actual rate per hour is higher than standar rate per hour. Variable OH efficiency variance is favorable as actual hours used is less than standard hours required for actual units produced.