Question

Kropf Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. Inputs Direct materials Direct labor Variable manufacturing overhead Standard Quantity or Hours per Unit of Output 8.10 liters 0.40 hours 0.40 hours Standard Price or Rate $ 7.70 per liter $28.70 per hour $ 6.60 per hour The company has reported the following actual results for the product for September: Actual output Raw materials purchased Actual cost of raw materials purchased Raw materials used in production Actual direct labor-hours Actual direct labor cost Actual variable overhead cost 10,300 units 84,700 liters $667,500 83,460 liters 3,840 hours $115,302 $ 20,314

Answer 1

>> Standard Price = $ 7.7

>> Standard Quantity = 10,300 * 8.1 = 83,430

>> Actual Price = ( $ 667,500 / 84,700 ) = $ 7.88

>> Actual Quantity = 83,460.

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A. Material Price Variance = ( Standard Price - Actual Price ) * Actual Quantity

>> Material Price Variance = ( $ 7.7 - $ 7.88 ) * 83,460

>> Material Price Variance = $ 15,023 Unfavorable.

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B. Material Quantity Variance = ( Standard Quantity - Actual Quantity ) * Standard Price

>> Material Quantity Variance = ( 83,430- 83,460) * $ 7.7

>> Material Quantity Variance = $ 231 Unfavorable.

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>> Standard Rate = $ 28.7

>> Standard Hours = 10,300 * 0.4 = 4,120 Hours.

>> Actual Rate = ( $ 115,302 / 3,840 ) = $ 30

>> Actual hours = 3,840.

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C. Labor Rate Variance = ( Standard Rate - Actual Rate ) * Actual Hours

>> Labor Rate Variance = ( $ 28.7- $ 30) * 3,840

>> Labor Rate Variance = $ 4,992 Unfavorable.

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D. Labor Efficiency Variance = ( Standard Hours - Actual Hours ) * Standard Rate

>> Labor Efficiency Variance = ( 4,120 - 3,840) * $ 28.7

>> Labor Efficiency Variance = $ 8,036 Favorable.

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