Question

QUESTIONS 28 THROUGH 33 ARE BASED ON THE FOLLOWING INFORMATION: Cox Engineering performs cement core tests in its laboratory. The following standards have been set for each core test performed: SP Direct materials, 3 pounds @ $0.75 per pound. Direct labor, 0.4 hours @ $12.00 per hour.se Variable factory overhead, 0.4 hours @ $4.00 per hour. Fixed factory overhead, 0.4 hours @ $10.00 per hour. Manufacturing overhead is assigned to core tests on the basis of direct labor hours. Budgeted fixed manufacturing overhead for the period was $8,000. The denominator activity used for determining the overhead rates was 2,000 core tests or 800 direct labor hours. On March 1 no direct materials (sand) were on hand. The following events occurred during March: AQ XAF) • AQ S8,600 pounds of sand were purchased at a cost of $7,310. (7,200 pounds of sand were used for core tests. 840 actual direct labor hours were worked at a cost of $8,610. Actual variable manufacturing overhead incurred was $3,200. Actual fixed manufacturing overhead incurred was $8,100. The company actually performed 2,000 core tests during the month. of the quantity nurchased for March

Answer 1

Standard DATA for		2000	test
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 3 Pound x 2000 test)=6000 Pound	$          0.75	$         4,500.00
Direct labor	( 0.4hr x 2000 test)=800hr	$        12.00	$         9,600.00
Variable Overhead	( 0.4hr x 2000 test)=800hr	$          4.00	$         3,200.00

Actual DATA for		2000	test
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	7200	$                0.85	$             6,120.00
Direct labor	840	$              10.25	$             8,610.00
Variable Overhead	840	$                3.81	$             3,200.00

Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                        4.00	-	$                       3.81	)	x	840
	160
	Variance		$                  160.00			Favourable-F
Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	800	-	840	)	x	$                           4.00
	-160
	Variance		$                  160.00			Unfavourable-U

Note no.	Explanation
1	Standard data is calculated by considering budgeted data and using actual data.
2	Variance refers to the difference between Standard cost and Actual cost.
3	If Actual cost is MORE than Standard Cost, the Variance is said to be UNFAVOURABLE.
4	If Actual cost is LESS than Standard Cost, the Variance is said to be FAVOURABLE.