Question

Gleim Company manufactures children's toys that are identical. The standard cost of each toy is:
Direct materials:
Four blocks of wood at $0.21 $0.84
Direct labor (1 hour at $5) 5.00
Overhead:
Fixed ($22900/54,000 units) 0.42
Variable 0.39
Total $6.65
Gleim bases the standard overhead rate on a volume of 54,000 units per month. In May, it manufactured 47,000 units. Using the following detailed data relative to production, compute the six variances from standard for the month.
Materials purchased:
220,000 blocks of wood at $ 0.23
Materials used:
189,000 blocks of wood
Direct labor: 46,500 hours at $ 5,05
Fixed manufacturing overhead $ 21,000
Variable manufacturing overhead $19,100

Answer 1

1	Materials price variance	$        4,400	unfavorable
	(0.23-0.21)*220000
2	Materials usage variance	210	unfavorable
	0.21*(189000-47000*4)
	Total materials variance	$        4,610	unfavorable
3	Labor rate variance	$        2,325	unfavorable
	(5.05-5)*46500
4	Labor efficiency variance	(2,500)	Favorable
	Net labor variance	$         (175)	Favorable
5	Overhead budget variance
	Actual (21000+19100)	40,100
	budget (22900+47000*0.39)	41,230
	Overhead budget variance	$      (1,130)	Favorable
6	Overhead volume variance
	Budget	41,230
Less:	Applied(47000*(0.42+0.39))	38,070
	Overhead volume variance	3,160	unfavorable
	Total Overhead Variance	$        2,030	unfavorable
	Total variance for month	$        6,465	unfavorable