Question

Rip Tide Company manufactures surfboards. Its standard cost information follows:

	Standard Quantity		Standard Price (Rate)			Standard Unit Cost
Direct materials (fiberglass)	15	sq. ft.	$	5	per sq. ft.	$	75.00
Direct labor	10	hrs.	$	15	per hr.		150.00
Variable manufacturing overhead (based on direct labor hours)	10	hrs.	$	6	per hr.		60.00
Fixed manufacturing overhead ($24,000 ÷ 300 units)							80.00

Rip Tide has the following actual results for the month of June:

Number of units produced and sold		315
Number of square feet of fiberglass used		4,950
Cost of fiberglass used	$	27,720
Number of labor hours worked		3,090
Direct labor cost	$	48,204
Variable overhead cost	$	15,090
Fixed overhead cost	$	24,750

1. Calculate the direct materials price, quantity, and total spending variances for Rip Tide. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting favorable, unfavorable, or no effect (i.e., zero variance).)

2. Calculate the direct labor rate, efficiency, and total spending variances for Rip Tide. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting favorable, unfavorable, or no effect (i.e., zero variance).)

3. Calculate the variable overhead rate, efficiency, and total spending variances for Rip Tide. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting favorable, unfavorable, or no effect (i.e., zero variance).)

4. Calculate the fixed overhead spending (budget) and volume variances for Rip Tide. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting favorable, unfavorable, or no effect (i.e., zero variance).)

Answer 1

Solution 1:

Direct Material Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AQ *	AP =				AQ *	SP =				SQ *	SP =
4950	$5.60	$27,720.00			4950	$5.00	$24,750.00			4725	$5.00	$23,625.00
			$2,970.00	U				$1,125.00	U
			Direct Material Price Variance					Direct Material Qty variance
Direct material price variance					$2,970.00	U
Direct material quantity variance					$1,125.00	U
Direct material cost variance					$4,095.00	U

Solution 2:

Direct Labor Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
3090	$15.60	$48,204.00			3090	$15.00	$46,350.00			3150	$15.00	$47,250.00
			$1,854.00	U				$900.00	F
			Direct Labor rate Variance					Direct Labor Efficiency Variance
Direct Labor Rate variance					$1,854.00	U
Direct Labor Efficiency variance					$900.00	F
Direct labor cost variance					$954.00	U

Solution 3:

Variable Overhead Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
3090	$4.88	$15,090.00			3090	$6.00	$18,540.00			3150	$6.00	$18,900.00
			$3,450.00	F				$360.00	F
			Variable overhead rate variance					Variable overhead efficiency variance
Variable overhead rate variance					$3,450.00	F
Variable overhead efficiency variance					$360.00	F
Variable overhead cost variance					$3,810.00	F

Solution 4:

Fixed Overhead Cost Variance

Actual Fixed OH Cost

Budgeted Fixed Overhead

Standard Cost (FOH Applies)

SH*

BR

$24,750.00

$24,000.00

3150

$8.00

$25,200.00

$750.00

U

$1,200.00

F

Fixed overhead Budget Variance

Fixed overhead volume variance

Fixed overhead Budget Variance

$750.00

U

Fixed overhead volume variance

$1,200.00

F

Total Fixed overhead variance

$450.00

F