Question

Unit 6 Lab-Principles of Accounting II

Exercise 213

Dart Company developed the following standard costs for its product for 2019:

DART COMPANY

Standard Cost Card

Cost Element   Standard Quantity × Standard Price = Standard Cost

Direct materials 4 pounds $ 5 $20

Direct labor 2 hours 10 20

Variable overhead 2 hours 4 8

Fixed overhead 2 hours 2 4

$52

The company expected to work at the 120,000 direct labor hours level of activity and produce 60,000 units of product.

Actual results for 2019 were as follows:

• 56,800 units of product were actually produced.

• Direct labor costs were $1,092,000 for 112,000 direct labor hours actually worked.

• Actual direct materials purchased and used during the year cost $1,108,800 for 231,000 pounds

. • Total actual manufacturing overhead costs were $680,000.

Compute the following variances for Dart Company for 2019 and indicate whether the variance is favorable or unfavorable.

1. Direct Materials Price Variance

2. Direct Materials Quantity Variance

3. Direct Labor Price Variance

4. Direct Labor Quantity Variance

5. Overhead Controllable Variance

6. Overhead Volume Variance $

Answer 1

SQ = 56800 X SQ Particulars Direct Material 4.00 = SP 5 227200 AQ 231000 AP 4.8 227200 Material Price Variance (MPV) = ( SP-AP) AQ >>MPV = 1 5 - 4.8 * >>MPV = 46200.00 Favorable 231000 Material Quantity Variance (MQV) = ( SQ - AQ) SP >>MQV = ( 227200 - 231000) * 5 >>MQV = -19000.00 Unfavorable Note-1 SQ = Standard Quantity for Actual output SP = Standard Price per Raw material AQ = Actual Quantity consumed AP = Actual Price per Raw material

SH = 56800 X SH Particulars Direct Labour 2 = 113600 SR AHP 10 1 12000 AR 9.75 113600 |Labour Price Variance (LPV) = ( SR - AR ) AHP >>LPV = ( 10 - 9.75 ) * >>LPV = 28000 Favorable 151695 48 ) A4 112000 12000 Labour Quantity Variance (LQV) = ( SH - AHW) SR >>LQV = ( 113600 - 112000) * 10 >>LQV = 16000 Favorable Note-1 |SH = Standard Hours per Actual Output SR = Standard Rate per Hour AHP = Actual Hours Paid AR = Actual Rate per Hour.