Question

PQ7a Saved Help Save & Exit Submit 1 Direct materials 6.00 lbs @ $5.00/lb =$ 30 Direct labor 5.00 hrs @ $12.00/hr = 60 Variable overhead (based on direct labor hours) 5.00 hrs. @ $6.00/hr = 30 0.6 points During the week ended March 28, the following activity took place: X 01:18:24 21,000 lbs. of raw materials were purchased for inventory at a cost of $4.95 per pound. 2,700 cases of finished product were produced. 16,500 lbs. of raw materials were used. 13,400 direct labor hours were worked at a total cost of $180,900. $79,060 of actual variable overhead costs were incurred. eBook Print . Required: Calculate each of the following variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.) References a. Price variance for raw materials purchased. b. Raw materials usage variance. c. Direct labor rate variance. d. Direct labor efficiency variance. e. Variable overhead spending variance. f. Variable overhead efficiency variance.

Answer 1

(A)
Material price variance = actual quantity purchased x (standard price - actual price)
= 21000 x ($5 - $4.95)
= $1050 Favorable

(B)
Material quantity variance = standard price x (standard quantity - actual quantity used)
= $5 x (16200 - 16500)
= $1500 Unfavorable
Where,
Standard quantity = actual output x standard quantity per unit of output
= 2700 x 6 = 16200 lbs

(C)
Labor rate variance = actual hours x (standard rate - actual rate)
= 13400 x ($12 - $13.5)
= $20100 Unfavorable
Where,
Actual rate = actual labor cost/actual hours
= $180900/13400 = $13.5

(D)
Labor efficiency variance = standard rate x (standard hours - actual hours)
= $12 x (13500 - 13400)
= $1200 Favorable
Where,
Standard hours = actual output x standard hours per unit of output
= 2700 x 5 = 13500 hours

(E)
Variable overhead rate/spending/expenditure variance = actual hours x (standard rate - actual rate)
= 13400 x ($6 - $5.90)
= $1340 Favorable
Where,
Actual rate = actual variable overhead/actual hours
= $79060/13400 = $5.90

(F)
Variable overhead efficiency variance = standard rate x (standard hours - actual hours)
= $6 x (13500 - 13400)
= $600 Favorable
Where,
Standard hours = actual output x standard hours per unit of output
= 2700 x 5 = 13500 hours