Question

Rogen uses the standard cost system. The Static original budgeted production was 5,000 units for October. The Input standards were: Std Quantity * Std Price per input =Std Cost per Output U Direct materials 1 lb./Output unit x $7/lb. = $7 per output unit Direct labor 1.6 hrs. /Output unit x $12 /hr. = $19.20 per unit Variable manufacturing (Mfg.) overhead 1.6 hrs. * $7.50 per hr = $12 per unit Fixed mfg. overhead (Budget $20,000) 1.6 hrs.. x $2.50 per hr = $4 per unit It Applied the standard costs to Actual Production throughout the period. As of the end of the period, a Flexible budget was prepared, to compute Production volume variance, and the Quantity Usage efficiency variances for Material and Labor actual usages separately. When Actual Costs are known a couple months later, it retroactively calculated Material Purchase Price and Labor Rate (or Price) variances; and Overhead Controllable variances. Rogen gathered the following actual results for October: Actual Units produced 4,800 Direct materials purchased and used (5,100 lbs.) $36,720 Direct labor cost (7,400 hours actual) $92,500 Manufacturing overhead costs incurred: Variable $59,700 and Fixed $21,000.

Answer 1

Labor efficiency variance

= (Standard labor hours - Actual labor hours) * Standard rate

= (1.6*4,800 - 7,400) * 12

= (7,680 - 7,400) * 12

= 3360 Favourable