Five brothers Company’s budget and actual costs per unit are provided below for the most recent...
Five brothers Company’s budget and actual costs per unit are provided below for the most recent period. During this period, 800 units were actually produced.
|
|
|
|
Product Budget Cost |
Product Actual Cost |
|
Materials |
Metres |
Unit Price Per Metre |
|
|
|
Budget |
6 |
$5.00 |
$30.00 |
|
|
Actual |
6.2 |
$4.80 |
|
$29.76 |
|
Direct labour |
Hours |
Hourly Rate |
|
|
|
Budget |
5 |
$5.00 |
$25.00 |
|
|
Actual |
4.8 |
$5.50 |
|
$26.40 |
|
Variable overhead |
Hours |
Hourly Rate |
|
|
|
Budget |
5 |
$4.00 |
$20.00 |
|
|
Actual |
4.9 |
$4.10 |
|
$20.09 |
|
Total unit cost |
|
|
$75.00 |
$76.25 |
Required:
Given the information above, compute the following variances. Also indicate if the variances are favorable or unfavorable.
|
1. Materials price variance |
|
|
2. Materials quantity variance |
|
|
3. Direct labour rate variance |
|
|
4. Direct labour efficiency variance |
|
|
5. Variable overhead rate variance |
|
|
6. Variable overhead efficiency variance 7. Please give some managerial suggestions based on your calculation. |
|
Homework Answers
Answer
- Working data
|
Actual DATA for |
800 |
units |
|
|
Quantity (AQ) |
Rate (AR) |
Actual Cost |
|
|
Direct Material |
4960 |
$ 4.80 |
$ 23,808.00 |
|
Direct labor |
3840 |
$ 5.50 |
$ 21,120.00 |
|
Variable Overhead |
3920 |
$ 4.10 |
$ 16,072.00 |
|
Standard DATA for |
800 |
units |
|
|
Quantity (SQ) |
Rate (SR) |
Standard Cost |
|
|
[A] |
[B] |
[A x B] |
|
|
Direct Material |
( 6 mtr x 800 units)=4800 mtr |
$ 5.00 |
$ 24,000.00 |
|
Direct labor |
( 5 hours x 800 units)=4000 hours |
$ 5.00 |
$ 20,000.00 |
|
Variable Overhead |
( 5 hours x 800 units)=4000 hours |
$ 4.00 |
$ 16,000.00 |
- Requirements solved [maximum possible]
[1]
|
Material Price Variance |
||||||
|
( |
Standard Rate |
- |
Actual Rate |
) |
x |
Actual Quantity |
|
( |
$ 5.00 |
- |
$ 4.80 |
) |
x |
4960 |
|
992 |
||||||
|
Variance |
$ 992.00 |
Favourable-F |
||||
[2]
|
Material Quantity Variance |
||||||
|
( |
Standard Quantity |
- |
Actual Quantity |
) |
x |
Standard Rate |
|
( |
4800 |
- |
4960 |
) |
x |
$ 5.00 |
|
-800 |
||||||
|
Variance |
$ 800.00 |
Unfavourable-U |
||||
[3]
|
Labor Rate Variance |
||||||
|
( |
Standard Rate |
- |
Actual Rate |
) |
x |
Actual Labor Hours |
|
( |
$ 5.00 |
- |
$ 5.50 |
) |
x |
3840 |
|
-1920 |
||||||
|
Variance |
$ 1,920.00 |
Unfavourable-U |
||||
[4]
|
Labour Efficiency Variance |
||||||
|
( |
Standard Hours |
- |
Actual Hours |
) |
x |
Standard Rate |
|
( |
4000 |
- |
3840 |
) |
x |
$ 5.00 |
|
800 |
||||||
|
Variance |
$ 800.00 |
Favourable-F |
||||
[5]
|
Variable Overhead Rate Variance |
||||||
|
( |
Standard Rate |
- |
Actual Rate |
) |
x |
Actual Labor Hours |
|
( |
$ 4.00 |
- |
$ 4.10 |
) |
x |
3920 |
|
-392 |
||||||
|
Variance |
$ 392.00 |
Unfavourable-U |
||||
[6]
|
Variable Overhead Efficiency Variance |
||||||
|
( |
Standard Hours |
- |
Actual Hours |
) |
x |
Standard Rate |
|
( |
4000 |
- |
3920 |
) |
x |
$ 4.00 |
|
320 |
||||||
|
Variance |
$ 320.00 |
Favourable-F |
||||
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