Question

Fortes Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. Inputs Direct materials Direct labor Variable manufacturing overhead Standard Quantity or Hours per Unit of Output 7.9 ounces 0.5 hours 0.5 hours Standard Price or Rate $ 8.00 per ounce $25.70 per hour $ 6.30 per hour The company has reported the following actual results for the product for April: Actual output Raw materials purchased Actual cost of raw materials purchased Raw materials used in production Actual direct labor-hours Actual direct labor cost Actual variable overhead cost 7,500 units 63, 010 ounces $379,910 59,260 ounces 3,440 hours $ 92,520 $ 21,034 Required: a. Compute the materials price variance for April b. Compute the materials quantity variance for April.

can you please show me how to arrive at the answers shown with explanations. greatly appreciate it!

Answer 1

A.Material price variation = Actual cost of raw material purchased- (raw material purchased ounces * standard price ounces)= 379910-(63010*8)

= 379910-504080= 124170F

B. Material quantity variance-= standard price ounces (raw materials used in production - Actual output * standard Quantity)

= 8(59260- 7500*7.9)= 8(59260- 59250)

= 8*10= 80U

C. Labor rate variation = Actual direct labor cost -(actual direct labor hours * overhead standard price)

= 92520- (3440*25.70)

= 92520-88408=4112U

D. Labor efficiency variance =overhead standard price (actual direct labor hours- actual output * standard hours per unit

= 25.70(3440- 7500*0.5)= 25.7 ( 3440-3750 )

= 25.70* 310= 7967F

E. Variable overhead rate variance= Actual variable overhead cost - (actual direct labor hours* standard rate of variable manufacturing overhead)

= 21034- (3440*6.30)= 21034-21672

= 638 F

F. Variable overhead efficiency variance=standard price of variable manufacturing overhead ( direct labor hours - Actual output * standard hours per unit)

=6.30(3440- 7500*0.5)= 6.30(3440-3750)

= 6.30*310= 1953F