Question

Northern illinois manufacturing reported the following results from last year operations:

Sals(1,320,000 units)

Variable Expenses:

Direct Materials 1,940,400

Direct Labor 5,450,220

Manufacturing OH 2,100,500

Selling and administrative 2,112,0000

Total Variable 11,603,120

Contribution Margin 4,236,880

Fixed Expenses

Manufacturing OH 767,700

Selling and administrative 1,126,800

Total fixed 1,894,500

NOI 2,342,380

Budgeted information for Northern Illinois is based on the following information:

Sales-units 1,300,000

Sales price $12 per unit

Direct materials $ 1,50 per unit

Direct labor $3.60 per unit

Variable OH $1.50 per unit

Variable S&A $1.6 per unit

Fixed OH $750,000

Fixed S&A $1,125,000

Direct materials -- standard quantity 2.00 lbs,standard price 0.75 per pound, standard cost 1.5

direct labor ---standard quantity 0.2 hrs, standard price 18.00 per hour, standard cost 3.6

vAriable OH-----standard price 1.5 per unit

During the year, the company purchased and used 2,772,000 pounds of material. the company worked 302,790 hours at a rate of $18 per hour

1.determine the material price and quantity variances,direct labor price and quantity variances and variable overhead spending and efficiency variances.

Answer 1

Answer with working is given below

Variable Overhead variance has been calculated based on Direct Labor hours

Price/Rate/Spending Variance $138,600 Favourable Direct Material Direct Labor Variable Overhead Total Quantity/Efficiency Variance -$99,000 Unfavourable -$698,220 unfavourable -$290,925 Unfavourable -$1,088,145 Unfavourable $170,425 $309,025 Favourable Favourable Working note Direct Material Variances a) Direct Material Price Variance $138,600 Favourable b) Direct Material Quantity Variance -$99,000 Unfavourable Direct Material Price Variance = ( Standard Rate - Actual Rate) * Actual Quantity Direct Material Quantity Variance = (Standard Quantity for Actual production - Actual Quantity) * Standard Rate Working note Actual price Actual Quantity Standard Actual Rate Actual Quantity Standard cost Standard Quantity Standard Rate 2,772,000 Actual Quantity at Actual Rate $0.70 2,772,000 $1,940,400 Actual Qty at Standard rate $0.75 2,640,000 $2,079,000 Standard Qty at Std rate $0.75 $1,980,000 Direct Material price variance Direct Material Quantity variance $138,600 Favourable -$99,000 Unfavourable Total Direct Material cost Variance $39,600 Favourable Direct Labor Variance c) Direct Labor Rate Variance $0 d) Direct Labor Efficiency Variance -$698,220 unfavourable Direct Labor Rate Variance = ( Standard Rate - Actual Rate) * Actual hours Direct Labor Efficiency Variance = ( Standard hours for Actual production - Actual hours) * Standard Rate Working note Actual price Actual Rate Standard cost Standard I hours Standard Rate Standard Rate Actual Hours X Actual Hours 302,790 Actual labor hours at actual rate $18.000 302,790 $5,450,220 Actual labor hours at std rate $18.00 264,000 $5,450,220 Standard hours at std rate $18.00 $4,752,000 Direct Labor Rate Variance Direct Labor Efficiency Variance $698,220 unfavourable Total Direct Labor Cost variance $698,220 Unfavourable Variable Overhead variance e) Variable Overhead Spending variance $170,425 Favourable f) Variable Overhead Efficiency variance - $290,925 Unfavourable Variable Overhead Rate Variance = (Standard Rate - Actual Rate) * Actual hours Variable Overhead Efficiency Variance = (Standard hours for Actual production - Actual hours) * Standard Rate Working note Actual price Actual Rate Standard Rate Standard cost Standard hours Actual Hours Actual Hours Standard Rate X 302,790 Actual Variable OH at actual rate $6.94 302,790 $2,100,500|Actual Variable OH at std rate $7.50 264,000 $2,270,925 Standard Variable OH at std rate $7.50 $1,980,000 Variable OH Spending Variance Variable Overhead Efficiency Variance $170,425 Favourable -$290,925 Unfavourable Total Variable Overhead variance $120,500 Unfavourable