Question

The standard cost sheet for Chambers Company, which manufactures one product, follows:
   

Direct materials, 40 yards at $3.00 per yard	$	120
Direct labor, 5 hours at $30 per hour		150
Factory overhead applied at 70% of direct labor
(variable costs = $70; fixed costs = $35)		105
Variable selling and administrative		74
Fixed selling and administrative		50
Total unit costs	$	499

  
Standards have been computed based on a master budget activity level of 29,800 direct labor-hours per month. Actual activity for the past month was as follows:  
  

Materials used		238,000	yards at $3.15 per yard
Direct labor		28,100	hours at $31.00 per hour
Total factory overhead	$	650,000
Production		5,500	units

  
Required:

Prepare variance analyses for the variable and fixed costs. Materials are purchased as they are used. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Requirea: Prepare variance analyses for the variable and fixed costs. Materials are purchase calculations. Indicate the effect of each variance by selecting "F" for favorable. not select either option.) Direct materials: Price variance Efficiency variance Direct labor: Price variance Efficiency variance Variable overhead: Efficiency variance Fixed overhead: Production volume variance

Answer 1

Direct Material Price Varaince = Actual Quantity Used * (Standard Price per unit - Actual Price Per Unit
	= 238000 Units*($3 per yards-$3.15 per )
	=$35700 (Unfavorable)
Direct Material Quantity Varaince = Standard Price Per Unit * (Standard Quantity For Actual Units Produced - Actual Quantity)
	= $3 Per Unit ([5500Units*40 yards Per Uniit] - [5500 Units *43.27Per Unit])
	=$54000 (Unfavorable)

Direct Labor Rate Varaince = Actual Hours * (Standard Rate Per Hour - Actual Rate Per Hour)
	= 28100 Hours*($30 per hour-$31 per hour)
	=$28100 (Unfavorable)
Direct Labor Efficiency Variance = Standard Rate Per Hour * (Standard Hours For Actual Units Produced - Actual Hours)
	= $30 Per Hour ([5500Units*5 Hours Per Unit] - [5500 Units *5.109 Hours Per Unit])
	=$18000 (Unfavorable)

Variable Overheads Efficiency Varaince = Standard Rate Per Hour * (Standard Hours For Actual Units Produced - Actual Hours)
	= $14 Per Hour ([5500Units*5 Hours Per Unit] - [5500 Units *5.109 Hours Per Unit])
	=$8400 (Unfavorable)

Fixed Overhead Volume Variance = Absorbed Fixed Overhead - Budegetd Fixed Overhead
=(5500 units *5 hour per unit *$7 per hour) - (29800 hours *$7 per hour )
=$192500 -208600
=$16100 (U)