Question

Granville Ltd's standard and actual costs per unit for the most recent period, during which 400 units were actually produced, are given below: Actual $3.36 Standard Materials: Standard: 2 metres at $1.50 per m. $3.00 Actual: 2.1 metres at $1.60 per m. Direct labour: Standard: 1.5 hrs. at $6.00 per hr. 9.00 Actual: 1.4 hrs. at $6.50 per hr. Variable overhead: Standard: 1.5 hrs. at $3.40 per hr. 5.10 Actual: 1.4 hrs. at $3.10 per hr. Total unit cost $17.12 There were no inventory of materials at the beginning or end of the period. 9.10 4.34 $16.80 Required: From the above information, compute the following variances. Show whether the variance is favourable (F) or unfavourable (U) with calculations: a) Materials price variance b) Materials quantity variance c) Direct labour rate variance d) Direct labour efficiency variance e) Variable overhead spending variance

Answer 1

Date for Variance
	Standard (400 units)				Actual (400 units)
	Qty/ Hours	Price/ Rate	Amount		Qty/ Hours	Price/ Rate	Amount
Materials	800	$        1.50	$ 1,200.00		840	$        1.60	$ 1,344.00
Labor	600	$        6.00	$ 3,600.00		560	$        6.50	$ 3,640.00
Variable OH	600	$        3.40	$ 2,040.00		560	$        3.10	$ 1,736.00

Variances
Material Price Variance			=	(Standard Price - Actual Price) x Actual Quantity
			=	($ 1.5 - $ 1.6) x 840
			=	$   84.00	(U)
Material Quan. Variance			=	(Standard Qty - Actual Qty) x Standard Price
			=	(800 - 840) x $ 1.5
			=	$   60.00	(U)
Direct Labor Rate Variance			=	(Standard Rate - Actual Rate) x Actual Hours
			=	($ 6 - $ 6.5) x 560
			=	$ 280.00	(U)
Direct Labor Effi. Variance			=	(Standard Hours - Actual Hours) x Standard Rate
			=	(600 - 560) x $ 6
			=	$ 240.00	(F)
Variable OH Spending Variance			=	(Standard Rate - Actual Rate) x Actual Hours
			=	($ 3.4 - $ 3.1) x 560
			=	$ 168.00	(F)