Question

sakelaris corporation makes a product with the following standard costs:

standard quantity or hours standard price or rate

direct materials 8.6 kilos $6.00 per kilo

direct labor 0.4 hours $11.00 per hour

variable overhead 0.4 hours $5.00 per hour

the company reported the following results concerning this product in august.

actual output    8,400 units

raw materials used in production 71,750 kilos

purchases of raw materials 76,900 kilos

actual direct labor-hours 3,320 hours

actual cost of raw materials purchases $469,090

actual direct labor cost $35,524

actual variable overhead cost $17,928

the company applies variable overhead on the basis of direct labor-hours. the direct materials purchases variance is compute when the materials purchase variance is computed when the materials are purchased. label each variance as favorable (f) or unfavorable (u).

required.

a. compute the materials quantity variance.

b. compute the materials price variance.

c. compute the variable overheard efficiency variance.

d. comput the variable overhead rate variance.

Answer 1

Solution

Material quantity variance

$           2,940.00

Favourable-F

.

Material Price Variance

$           7,690.00

Unfavourable-U

.

Variable Overhead Efficiency Variance

$               200.00

Favourable-F

.

Variable Overhead Rate Variance

$           1,328.00

Unfavourable-U

Working

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    6.00	-	$                     6.10	)	x	76900
	-7690
	Variance		$             7,690.00			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	72240	-	71750	)	x	$              6.00
	2940
	Variance		$             2,940.00			Favourable-F

.

Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                    5.00	-	$                     5.40	)	x	3320
	$         (1,328.00)
	Variance		$             1,328.00			Unfavourable-U
Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	3360	-	3320	)	x	$              5.00
	$               200.00
	Variance		$                 200.00			Favourable-F

.

Standard DATA for		8400	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 8.6 KILO x 8400 Units)=72240 KILO	$                   6.00	$         4,33,440.00
Variable Overhead	( 0.4 Hour x 8400 Units)=3360 Hour	$                   5.00	$            16,800.00

.

Actual DATA for		8400	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	76900	$            6.10	$                         4,69,090.00
Variable Overhead	3320	$            5.40	$                            17,928.00