Question

I don't know how to get the calculations for the standard quanity

Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 124,000 liters at a budgeted price of $255 per liter this year. The standard direct cost sheet for one liter of the preservative follows.

Direct materials (2 pounds @ $16) $ 32 Direct labor (0.5 hours @ $48) 24

Variable overhead is applied based on direct labor hours. The variable overhead rate is $140 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $70 per unit. All non-manufacturing costs are fixed and are budgeted at $2.4 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $774,000 unfavorable. he following is the actual income statement (in thousands of dollars) for the year. Sales revenue $ 30,398 Less variable costs Direct materials 3,298 Direct labor 2,810 Variable overhead 7,830 Total variable costs $ 13,938 Contribution margin $ 16,460 Less fixed costs Fixed manufacturing overhead 1,170 Non-manufacturing costs 1,350 Total fixed costs $ 2,520 Operating profit $ 13,940 During the year, the company purchased 200,000 pounds of material and employed 52,400 hours of direct labor. Required: a. Compute the direct material price and efficiency variances. b. Compute the direct labor price and efficiency variances. c. Compute the variable overhead price and efficiency variances.

A. Direct Material

Price Variance    98000    Efficiency Variance    I don't know how to calculate the standard quanity

B. Direct Labor

Price Variance = Help Efficiency Variance= Help

C. Variable Overhead

Price Variance Help    Efficiency Variance Help

Answer 1

Comoany manufacture and sale 124000 Ltr @ budgeted price @$255/ ltr
Stnadrd direct cost sheet as below
		Unit	Rate$/ Unt	Cost $
Direct Material		2 pounds	16	32
Direct Labour		0.5 Hr	48	24
Variable OH applied on DL hr base
Variable OH $ 140 / DL hr
Fixed budgeted rate = $ 70 / Unit
All No Manufactruing cost $ 2.4 Mio
Sale variance Unfav $ 774000
Income Statement ( $'000)
		Amnt	Amnt
Revenue			30,398
Less
variable cost
Direct material		3,298
Direct Labour		2,810
Variable OH		7,830
Total Operation cost			13,938
Contribution			16,460
Less
Fixed cost			2,520
Net profit			13,940

Company purchased material (Pound)				2,00,000
Employed Direct labout Hr				52400

Need to calculate variance Analysis
Actual price of Material
Material Cost $				32,98,000
( as above)
Company purchased material (Pound)				2,00,000
Actual Rate $/ Pound				16.49
Standard cost for Actual output (A*B)$				32,00,000
Company purchased material (Pound)
( Actual Output)				2,00,000	A
Standard rate $/ Pound				16	B
( as above and as per Question)				2,36,000	A1
Standard rate $/ Pound				16	B1
Standard Quantity Pound
( need to derived as below)
Standard cost (A1*B1)$				37,76,000

Sales price $/ Unit			255
Less
variable cost
Direct Material		32
Direct Labour		24
Variable Overhead
0.5 hrs @ $140 / DL hr		70
Total Operation cost			126
Contribution$ / unit			129
Sale variance Unfav $ 774000
Mean Actual Sales is lower than Budgeted Sales
So We need to derived value (ltr)			6,000
$774000/129
Sale made - Ltr			124000
So Actual Sales
(124000 lt-6000 ltr)			1,18,000

As per question Standard material unit 2 Pound / Ltr
so Standard Quantity would be			2,36,000	Pound
(118000 Ltr * 2pound / Ltr)

Material variance
Actual cost > Standard cost for Actual Output
$3298000> $3200000= $ 98000 Unfavorable
Material Quantity variance
Standard cost for Actual Output <Standard cost
$3200000<$3776000		$576000	Favourable

Need to calculate variance Analysis
Actual Labour cost$				28,10,000
( as above)
Company employed hrs				40,400
Standard Rate $/ Pound				48
Standard cost for Actual output (A*B)$				19,39,200
Company purchased material (Pound)
( Actual Output)				40,400	A
Standard rate $/ Pound				48	B
Standard Hr				59,000	A1
Standard rate $/ Pound				48	B1
Standard cost (A1*B1)$				28,32,000
Sales price $/ Unit			255
Less
variable cost
Direct Material		32
Direct Labour		24
Variable Overhead
0.5 hrs @ $140 / DL hr		70
Total Operation cost			126
Contribution$ / unit			129
Sale variance Unfav $ 774000
Mean Actual Sales is lower than Budgeted Sales
So We need to derived value (ltr)			6,000
$774000/129
Sale made - Ltr			124000
So Actual Sales
(124000 lt-6000 ltr)			1,18,000
As per question Standard Labour hr =0.5 hr/ Ltr
so Standard Hrs would be			59,000	Pound

Labour rate variance
Actual cost > Standard cost for Actual Output
$2810000> $1939200= $ 870800 Unfavorable
Labour Efficiency variance
Standard cost for Actual Output< standard cost
$1939200-$2832000=$ 892800 Favorable

Need to calculate variance Analysis
Actual vairable OH cost$				78,30,000
( as above)
Company employed hrs				40,400
Standard Rate $/ DL hr				140
Standard cost for Actual output (A*B)$				56,56,000
Company employed hrs				40,400	A
Standard rate $/ Pound				140	B
Standard Hr ( Calculation as above )				59,000	A1
Standard rate $/ Pound				140	B1
Standard cost (A1*B1)$				82,60,000

Variable OH spending var
Actual cost > Standard cost for Actual Output
$7830000> $5656000= $ 2174000 Unfavorable
Variable OH Efficiency variance
Standard cost for Actual Output< standard cost
$5656000-$8260000=$ 2604000 Favorable