Question

Problem 24-02A Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2020. Costs and Production Data Raw materials unit cost Raw materials units Direct labor payroll Direct labor hours Manufacturing overhead incurred Manufacturing overhead applied Machine hours expected to be used at normal capacity Budgeted fixed overhead for June Variable overhead rate per machine hour Fixed overhead rate per machine hour Actual $2.20 11,300 $166,500 15,000 $210,420 Standard $2.10 10,900 $159,600 15,200 $214,320 43,500 $73,950 $3.00 $1.70 Overhead is applied on the basis of standard machine hours. 3.00 hours of machine time are required for each direct labor hour. The jobs were sold for $473,000. Selling and administrative expenses were $44,400. Assume that the amount of raw materials purchased equaled the amount used.

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Answers are highlighted in yellow: Solution: Materials price variance: Standard Price (SP) Actual Price (AP) $ $ 2.10 2.20 Labor price variance: Standard Rate (SR) (159600/15200) Actual rate (AR) (166500/15000) $ $ 10.50 11.10 Actual Quantity (AQ) Materials price variance (SP-AP)*Actual Qty. 11300 1,130 Unfavorable Actual Hours (AH) c) Labor price variance (SR - AR)*Actual Hours. 15000 $ 9,000 Unfavorable $ Materials quantity/efficiency variance: Standard Quantity (SQ) Actual Quantity (AQ) 10900 11300 Labor quantity/efficiency variance: Standard Hours (SH) Actual Hours (AH) 15200 150001 Standard Price (SP) $ b) Materials quantity variance (SQ-AQ)*Standard Price $ 2.10 840 Unfavorable Standard Rate (SR) d) Labor efficiency variance (SH-AH)*Standard Rate $ 10.50 $ 2,100 Favorable 1) Total Material Variance Material Price Variance Material quantity Variance $ $ $ 1,970 Unfavorable 1,130 Unfavorable 840 Unfavorable 2) Total Labor Variance Labor price variance Labor Quantity variance $ 6,900 Unfavorable $ 9,000 Unfavorable $ 2,100 Favorable (210420) - (214320) = $3,900 Total overhead variance = (Actual overhead cost) - (Standard overhead Applied) Total overhead variance = $ 3,900 Favorable

Income Statement (10900*2.10)+(159600)+(214320) 473000 396810 76190 Service Revenue Cost of Service provided (at standard) Gross profit (at standard) Variances: Material price Material Quantity Labor price Labor quantity Overhead Total Variance Gross profit (actual) Selling and admin. Expense Net Income/-Loss $ 1,130 Unfavorable 840 Unfavorable 9,000 Unfavorable 2,100 Favorable 3,900 Favorable Unfavorable $ $ $ $ 4,970 Unfavorable 71,220 44,400 26,820