Question

Fortes 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. Standard Quantity per Unit of Inputs Direct materials Direct labor Output 0.60 hours 0.60 hours Standard Price or Rate S 6.10 per ounce s 19.80 per hour 8.0 ounces Variable manufacturing overhead $ 4.40 per hour The company has reported the following actual results for the product for April: Actual output 5,600Units Actual cost of raw materials purchased&Used Raw materials used in production Actual direct labor-hours 277,822 44,810ounces 3,150hours 64,890 Actual direct labor cost Actual variable overhead cost $ 12,915 Required: a. Compute the Total Production Cost Variance for April b. Compute the materials price variance for April. c. Compute the materials quantity variance for April. Compute the labor rate variance for April. Compute the labor efficiency variance for April. d. e. f Compute the variable overhead rate variance for April Compute the variable overhead efficiency variance for April

Answer 1

Answer

• All working forms part of the answer
• Working for data

Actual DATA for		5600	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	44810	$              6.200	$        277,822.00
Direct labor	3150	$              20.60	$           64,890.00
Variable Overhead	3150	$                4.10	$           12,915.00

Actual Cost = $ 355,627

Standard DATA for		5600	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 8 ounces x 5600 units)=44800 ounces	$                   6.10	$     273,280.00
Direct labor	( 0.6 hours x 5600 units)=3360 hours	$                19.80	$       66,528.00
Variable Overhead	( 0.6 hours x 5600 units)=3360 hours	$                   4.40	$       14,784.00

Total Standard Cost = $ 354,592

• Requirement ‘a’
  Total Production Cost Variance = Standard cost – Actual cost = 354592 – 355627
  = $ 1035 Unfavourable
• Requirement ‘b’

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                        6.10	-	$                       6.20	)	x	44810
	-4481
	Variance		$              4,481.00			Unfavourable-U

• Requirement ‘c’

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	44800	-	44810	)	x	$                           6.10
	-61
	Variance		$                    61.00			Unfavourable-U

• Requirement ‘d’

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                     19.80	-	$                    20.60	)	x	3150
	-2520
	Variance		$              2,520.00			Unfavourable-U

• Requirement ‘e’

Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	3360	-	3150	)	x	$                        19.80
	4158
	Variance		$              4,158.00			Favourable-F

• Requirement ‘f’

Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                        4.40	-	$                       4.10	)	x	3150
	945
	Variance		$                  945.00			Favourable-F

• Requirement ‘g’

Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	3360	-	3150	)	x	$                           4.40
	924
	Variance		$                  924.00			Favourable-F