Black and Decker Corporation has the following information is for their standard and actual costs:
Standard Costs:
Budgeted units of production - 9,000 (100% of capacity)
Standard material per unit - 12 lbs.
Standard material cost - $14.00 per pound
Standard labor hours per unit - 12
Standard labor rate - $29.00 per hour
Standard variable overhead rate - $7.50 per labor hour
Budgeted fixed overhead - $729,000
Fixed overhead rate is based on budgeted labor hours at 100% capacity
Actual Costs:
Actual Production - 8,400 units
Actual material purchased and used - 87,360 pounds
Actual total material cost - $1,222,350
Actual labor - 101,200 hours
Actual total labor costs - $2,884,200
Actual fixed overhead - $756,250
Actual variable overhead - $715,000
Determine: (a) the quantity, price variance, and total direct materials cost variance; (b) the time variance, rate variance, and total direct labor cost variance; and (c) the volume variance, controllable variance, and total factory overhead cost variance.
Solution a:
Direct Material Cost Variance | ||||||||||||
Actual Cost | Standard cost for actual quantity | Standard Cost | ||||||||||
AQ * | AP = | AQ * | SP = | SQ * | SP = | |||||||
87360 | $13.99 | $1,222,350.00 | 87360 | $14.00 | $1,223,040.00 | 100800 | $14.00 | $1,411,200.00 | ||||
$690.00 | F | $188,160.00 | F | |||||||||
Direct Material Price Variance | Direct Material Qty variance | |||||||||||
Direct material price variance | $690.00 | F | ||||||||||
Direct material quantity variance | $188,160.00 | F | ||||||||||
Direct material cost variance | $188,850.00 | F |
Solution b:
Direct Labor Cost Variance | ||||||||||||
Actual Cost | Standard cost for actual quantity | Standard Cost | ||||||||||
AH * | AR = | AH * | SR = | SH * | SR = | |||||||
101200 | $28.50 | $2,884,200.00 | 101200 | $29.00 | $2,934,800.00 | 100800 | $29.00 | $2,923,200.00 | ||||
$50,600.00 | F | $11,600.00 | U | |||||||||
Direct Labor rate Variance | Direct Labor Efficiency Variance | |||||||||||
Direct Labor Rate variance | $50,600.00 | F | ||||||||||
Direct Labor Efficiency variance | $11,600.00 | U | ||||||||||
Direct labor cost variance | $39,000.00 | F |
Solution c:
Controllable Variance | ||
Actual overhead | $1,471,250.00 | |
Budgeted overhead | $1,485,000.00 | |
Controllable variance | $13,750.00 | F |
Fixed overhead volume variance | ||
Budgeted fixed overhead | $729,000.00 | |
Fixed overhead cost applied | $680,400.00 | |
Fixed overhead volume variance | $48,600.00 | U |
Total factory overhead cost variance = $13,750 F + $48,600 U = $34,850 U
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