Question

Direct materials (28 lbs. o $4 per lb.) Direct labor (8 hrs. $8 per hr.) Factory overhead-variable (8 hrs. $5 per hr.) Factory overhead-fixed (8 hrs. O $7 per hr.) $ 112.00 64.00 40.00 56.00 Total standard cost $ 272.00 The predetermined overhead rate is based on a planned operating volume of BOX of the productive capacity of 50,000 units per quarter. The following flexible budget information is available. Operating Levels 70% 35,000 280,000 80% 40,000 320,000 90% 45,000 360,000 Production in units Standard direct labor hours Budgeted overhead Fored factory overhead Variable factory overhead $2,240,000 $ 1,400,000 $2,240,000 $1,600,000 $2,240,000 $1,800,000 During the current quarter, the company operated at 90% of capacity and produced 45.000 units of product actual direct labor totaled 357000 hours. Units produced were assigned the following standard costs: Direct materials (1.260,000 lbs. 54 per lb) Direct labor (360,000 hrs. $8 perhe) Factory overhead (360,000 hrs. $12 per hr) $ 5.040,000 2.880,000 4,320,000 Total standard cost $ 12.240.000 Actual costs incurred during the current quarter follow $ Direct materials (1.255.000 lbs. 5410 perib) Director 57000 5775 perhe) Fored factory overhead costs Variable factory overhead costs 5.145.500 2.700.750 15349 2774 Total actual costs $ 94,041,073

Answer 1

Solution 1:

Direct Material Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AQ *	AP =				AQ *	SP =				SQ *	SP =
1255000	$4.10	$5,145,500.00			1255000	$4.00	$5,020,000.00			1260000	$4.00	$5,040,000.00
			$125,500.00	Unfavorable				$20,000.00	Favorable
			Direct Material Price Variance					Direct Material Qty variance
Direct material price variance					$125,500.00	Unfavorable
Direct material quantity variance					$20,000.00	Favorable
Total direct material variance					$105,500.00	Unfavorable

Solution 2:

Direct Labor Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
357000	$7.75	$2,766,750.00			357000	$8.00	$2,856,000.00			360000	$8.00	$2,880,000.00
			$89,250.00	Favorable				$24,000.00	Favorable
			Direct Labor rate Variance					Direct Labor Efficiency Variance
Direct Labor Rate variance					$89,250.00	Favorable
Direct Labor Efficiency variance					$24,000.00	Favorable
Total direct labor variance					$113,250.00	Favorable

Solution 3:

Controllable Variance
Actual overhead	$6,129,623.00
Budgeted overhead	$4,040,000.00
Controllable variance	$2,089,623.00	Unfavorable

Fixed overhead volume variance
Budgeted fixed overhead	$2,240,000.00
Fixed overhead cost applied	$2,520,000.00
Fixed overhead volume variance	$280,000.00	Favorable