Question

18 Select none 18 Invert selection Gourmet, Inc. produces containers of frozen food. During October the company had the following actual production and costs. Actual Containers produced in October 720 Variable Overhead $5,700 Fixed Overhead $13,000 Direct Labor cost $80,000 Which is 3,900 Direct labor hours Actual material purchased $28.000 Which is 15.000 pounds Actual Material pounds used 14,600 pounds Select 0 Search Size Overhead is budgeted and applied using direct-labor hours. Standard cost and annual budget information are as follows: 49 KB Direct Labor Direct Material $19.75 $2.00 $99 $40 Standard cost per container 5 hours at 20 pounds at Direct labor 5 hours at Direct labor 5 hours at Taras kh TK - O BShare Commer 547 0 5 Variable overhead $1.50 $7.50 Fixed Overhead $3.00 Total $15 $161.25 te Format Ideas Sort & Filter Find & Select Budgeted Monthly Fixed Overhead $12,500 Editing Ideas Required: Make sure you do not forget to label the variances U or F. You need to show your work either by cell reference or showing your calculation to the side. 1. Calculate the direct materials price and quantity variance. Please note that the materials price variance is based on actual material purchased and the quantity variance is based on material used Materials price variance Materials Quantity variance IN o P Q 2. Calculate the direct labor rate and efficiency variances. Labor rate variance Labor Efficiency variance 3. Calculate the variable overhead spending and efficiency variances. Variable overhead spending variance Variable overhead efficiency variance 4. Calculate the fixed overhead budget variance. Fixed overhead budget variance 5. Pick out the two variances that you computed above that you think should be further investigated. Explain why you picked these 2 variances and what might be the possible cause of the variances.

Answer 1

Solution 1. Actual Material Purhased ($) Actual Material Purhased (pounds) Actual Material price per unit 28,000.00 15000 pounds 1.87 Material Price Variance (Actual Price - Standard Price) x Actual Quantity ($1.87 - $2.00) x 15000 pounds $ 1,950.00 Favourable Standard Qty to produce 720 units @ 20 pounds per unit = 14400 pounds Material Quantity Variance (Actual Quantity - Standard Quantity) x Standard Price (14600 pounds - 14400 pounds) < $2.00 200 pounds x $2.00 $ 400.00 Unfavourable Solution 2. Standard Labour hours Standar Labour hour rate A. Actual Labour Cost B. Actual Labour hours Actual Labour hour rate (A/B) 5 hours x 720= 3600 hours 19.75 per hour 80,000.00 3900 hours 20.51 per hour Labor rate Variance (Actual Rate - Standard Rate) x Actual hours worked ($20.51 - $19.75) x 3900 $0.76 x 3900 = $2.964.00 Unfavou $2,964.00 Unfavourable Labor Efficiency Variance (Actual hours - Standard hours) x Standard rate (3900-3600) < $19.75 300 hours x $19.75 $ 5,925.00 Unfavourable

Solution 3. Actual hours 3900 hours Standard Variable Ohd Rate 1.50 per hour Actual Variable overhead 5,700.00 Variable Overhead spending Variance = Actual Variable overhead - (Actual hours x Standard Variable overhead rate per hour) $5700 - (3900 hours x $1.50) $5700 - $5850 = $ 150.00 Favourable Variable Overhead Efficiency Variance = (Standard hours - Actual hours ) x Standard Variable overhead rate per hour (3600 - 3900) x $1.5 300 x $1.50 = $ 450.00 Unfavourable Solution 4. Actual Fixed Overheads Budgeted fixed Overheads $ 13,000.00 720 units x $15 $ 10,800.00 = Fixed Overhead Budget variance = Actual Fixed overheads - Budgeted Fixed Overheads $13000 - $10800 $ 2,200.00 Unfavourable

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