Question

Material, Labor, and Variable Overhead Variances The following summarized manufacturing data relate to Thomas Corporation's April operations, during which 2,000 finished units of product were produced. Normal monthly capacity is 1,100 direct labor hours. Standard Units Costs Total Actual Costs Direct material Standard (2 lb. @ $18.00/lb.) $36 Actual (4,200 lb. @ $19/lb.) $79,800 Direct labor Standard (0.5 hr. @ $33/hr.) $16.50 Actual (950 hrs. @ $32.20/hr.) 30,590 Variable overhead Standard (0.5 hr. @ $15/hr.) $7.50 Actual 15,450 Total $60 $125,840

Answer 1

According to the question, we have to Calculate variance.

Requirement 1: Material Price variance and Materials efficiency variance.

Material Variances

Actual Cost	$79,800
Split Cost (4200 lb. * $18)	$75,600
Standard Cost (4000 lb. * $18)	$72,000
Materials price (Working Note)	$4,200	U
Materials efficiency (Working Note)	$3,600	U

Working Note:-

Calculation of Material Price variance

= (Actual price - Standard price) * Actual quantity purchased

= ($19 - $18) * 4200 lb. = $4,200 Unfavorable

Calculation of Material Efficiency

= (Actual quantity - Standard quantity) * Standard price

= (4200 lb. - (2000 * 2)) * $18 = $3,600 Unfavorable

Requirement 2:- Labor rate variance and Labor efficiency variance.

Labor Variance

Actual Cost	$30,590
Split Cost (950 hrs. * $33)	$31,350
Standard Cost (2000 * 0.5 * $33)	$33,000
Labor rate (Working Note)	$760	F
Labor efficiency (Working Note)	$1,650	F

Working Note:-

Calculation of Labor rate variance

= (Actual price - Standard price) * Actual hours used

= ($32.20 - $33) * 950 hours = $ 760 Favorable

Calculation of Labor Efficiency Variance

= (Actual quantity - Standard quantity) * Standard rate

= (950 hours - (2000 * 0.5) * $33 = $1,650 Favorable

Requirement 3:- Variable overhead Spending and Variable Overhead Efficiency

Variable Overhead Variance

Actual Cost	$15,450
Split Cost
Standard Cost (2000 * 0.5 * $15)	$15,000
Variable Overhead Spending (Working Note)	$1,200	U
Variable Overhead Efficiency (Working Note)	$750	F

Working Note:-

Calculation of Variable Overhead Spending Variance

= Actual Cost - (Actual hours * Standard Rate per hour)

= $15,450 - (950 * $15) = $1,200 Unfavorable

Calculation of Variable Overhead Efficiency Variance

= (Actual hours * Standard Rate per hour) - (Actual Units produced * Standard Rate)

= (950 * $15) - (2000 * $7.5)

= $14,250 - $15,000 = $750 Favorable

Thank you..

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