Question

Delta Products prepares its budgets on the basis of standard costs. A responsibility report is prepared monthly showing the differences between master budget and actual results. Variances are analyzed and reported separately. There are no materials inventories.

The following information relates to the current period:

  

Standard costs (per unit of output)
Direct materials, 6 gallons @ $2.00 per gallon	$	12
Direct labor, 3 hours @ $36 per hour		108
Factory overhead
Variable (25% of direct labor cost)		27
Total standard cost per unit	$	147

Actual costs and activities for the month follow:

Materials used		15,120	gallons at $1.80 per gallon
Output		2,280	units
Actual labor costs		6,400	hours at $40 per hour
Actual variable overhead	$	60,750

Required:

Prepare a cost variance analysis for the variable costs. (Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Answer 1

Direct materials: Price Variance Efficiency variance Direct materials cost variance $3,024 $ 2,880 $ 104 $ 25, 600 lu $ 15,840 $9,760 Direct labore Price variance Efficiency variance Direct labor cost Variance Variable overhead Price Variance Efficiency Variance Variable overhead Cost Venance 1. Coco $ 3,1500 $3,960 TE $.810 TF Wookingt @ Direct materialst. Actual costs - (AP XAQ) - $1.80 X 15120 gallons - $ 27,216 Actuel inputs at standaod price = (SP XAB) < $2X15510 = 980,240. flexible budget (standhood Inputs allowed for Good Qulpul) (SPX58) = $9 x 6 x 2280 - $a 7,3 60 Price Variance - 427,016 - $ 30,240 - 43024 F efficency Variance = $80,840 - $27,360 = ($9880/ Direet materials cost variance = $30248 + 428 800 = $149)

- Direct labor Actual Costs - 6400 X$40 = $256,000 Actucal Inputs at standard poicer 6400x436 = $230,400 Flexible Budget (standaged inputs allowed for Cood output) = 436 X 3 x 2780 -$246,240) Police Verjance $256,000 - $230, 400 $25600] Efficiency Vinjanie - € 246,240 - $280,400 - ($15,840] F Direct labor cost Vasiance & $256000+ $15,840 f = ($9760)
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