ABC Company has set the following standards in order to produce one unit of its single product: standard quantity standard price direct materials 2.7 yards ?? per yard direct labor 2 hours $14 per hour variable overhead 2 hours ?? per hour During August, ABC Company spent $133,770 to purchase direct materials and had direct labor totaling $189,440. During August, ABC Company used 16,000 yards of direct materials in the production of units. ABC had 2,500 yards of materials in its August 1 direct material inventory and had 1,200 yards yards remaining in its direct materials inventory at August 31. ABC Company reported the following variances for August: Direct material price variance .............. $12,495 unfavorable Direct labor rate variance .................. $24,240 unfavorable Total direct labor variance ................. $6,560 favorable Variable overhead spending variance ......... $1,900 unfavorable Variable overhead efficiency variance ....... $20,900 favorable Calculate ABC Company's actual variable overhead cost for August.
Firstly we need to calculate actual direct labor hours and standard variable overhead cost which is shown as follows:-
Direct labor rate variance = (Std labor rate*Actual labor hours) - Actual direct labor cost
$24,240 Unfavorable = (Std labor rate*Actual labor hours) - $189,440
-24,240+189,440 = $14*Actual labor hours
14*Actual labor hours = $165,200
Actual labor hours = $165,200/14 = 11,800 hours
Total Direct Labor variance = Std Labor cost - Actual labor cost
$6,560 Favorable = Std Labor cost - $189,440
Std labor cost = 6,560+189,440 = $196,000
Std labor hours = Std labor cost/Std labor rate per hour
= $196,000/$14 per hour = 14,000 hours
Calculation of actual variable overhead rate per hour.
Variable Over.head efficiency variance = (Std hours - Actual hours)*Std variable overhead rate
20,900 favorable = (14,000 hrs - 11,800 hrs)*Std variable overhead rate
Std variable overhead rate = 20,900/(14,000 - 11,800) hrs
= 20,900/2,200 hrs = $9.50 per hour
Variable Overhead spending variance = (Std rate - Actual rate)*Actual hours
1,900 Unfavorable = ($9.50 - Actual rate)*11,800 hrs
-1,900/11,800 hrs = $9.50 - Actual rate
-0.161016949 = $9.50 - Actual rate
Actual rate = $9.50+0.161016949 = $9.661016949
Actual variable overhead cost = Actual labor hours*Actual variable overhead rate
= 11,800 hrs*$9.661016949 = $114,000
Therefore actual variable overhead cost for August is $114,000.
ABC Company has set the following standards in order to produce one unit of its single...
ABC Company has set the following standards in order to produce one unit of its single product: standard quantity standard price direct materials 2.7 yards ?? per yard direct labor 2 hours $14 per hour variable overhead 2 hours ?? per hour During August, ABC Company spent $133,770 to purchase direct materials and had direct labor totaling $189,440. During August, ABC Company used 16,000 yards of direct materials in the production of units. ABC had 2,500 yards of materials in...
ABC Company has set the following standards in order to produce one unit of its single product: standard quantity standard price direct materials 2.7 yards ?? per yard direct labor 2 hours $14 per hour variable overhead 2 hours ?? per hour During August, ABC Company spent $133,770 to purchase direct materials and had direct labor totaling $189,440. During August, ABC Company used 16,000 yards of direct materials in the production of units. ABC had 2,500 yards of materials in...
ABC Company has set the following standards in order to produce one unit of its single product: standard quantity standard price direct materials 2.7 yards ?? per yard direct labor 2 hours $14 per hour variable overhead 2 hours ?? per hour During August, ABC Company spent $133,770 to purchase direct materials and had direct labor totaling $189,440. During August, ABC Company used 16,000 yards of direct materials in the production of units. ABC had 2,500 yards of materials in...
ABC Company has set the following standards in order to produce one unit of its single product: standard quantity standard price direct materials 2.7 yards ?? per yard direct labor 2 hours $14 per hour variable overhead 2 hours ?? per hour During August, ABC Company spent $133,770 to purchase direct materials and had direct labor totaling $189,440. During August, ABC Company used 16,000 yards of direct materials in the production of units. ABC had 2,500 yards of materials in...
ABC Company has set the following standards in order to produce one unit of its single product: standard quantity standard price direct materials 2.7 yards ?? per yard direct labor 2 hours $14 per hour variable overhead 2 hours ?? per hour During August, ABC Company spent $133,770 to purchase direct materials and had direct labor totaling $189,440. During August, ABC Company used 16,000 yards of direct materials in the production of units. ABC had 2,500 yards of materials in...
ABC Company has set the following standards in order to produce one unit of its single product: standard quantity standard price direct materials 2.7 yards ?? per yard direct labor 2 hours $14 per hour variable overhead 2 hours ?? per hour During August, ABC Company spent $133,770 to purchase direct materials and had direct labor totaling $189,440. During August, ABC Company used 16,000 yards of direct materials in the production of units. ABC had 2,500 yards of materials in...
ABC Company has set the following standards in order to produce one unit of its single product: standard quantity standard price direct materials 2.7 yards ?? per yard direct labor 2 hours $14 per hour variable overhead 2 hours ?? per hour During August, ABC Company spent $133,770 to purchase direct materials and had direct labor totaling $189,440. During August, ABC Company used 16,000 yards of direct materials in the production of units. ABC had 2,500 yards of materials in...
DC Company has set the following standards in order to produce one unit of product: standard quantity standard price direct materials 2.7 yards ?? per yard direct labor 2 hours $14 per hour variable overhead 2 hours ?? per hour During August, DC Company spent $133,770 to purchase direct materials and had direct labor totaling $189,440. During August, DC Company used 16,000 yards of direct materials in the production of units. DC had 2,500 yards of materials in its August...
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