Question

Rogen Corporation manufactures a single product. The standard cost per unit of product is shown below.

Direct materials—1 pound plastic at $6.00 per pound		$ 6.00
Direct labor—2.0 hours at $11.85 per hour		23.70
Variable manufacturing overhead		12.00
Fixed manufacturing overhead		12.00
Total standard cost per unit		$53.70

The predetermined manufacturing overhead rate is $12.00 per direct labor hour ($24.00 ÷ 2.0). It was computed from a master manufacturing overhead budget based on normal production of 11,800 direct labor hours (5,900 units) for the month. The master budget showed total variable costs of $70,800 ($6.00 per hour) and total fixed overhead costs of $70,800 ($6.00 per hour). Actual costs for October in producing 3,700 units were as follows.

Direct materials (3,890 pounds)		$ 23,729
Direct labor (7,300 hours)		87,965
Variable overhead		63,934
Fixed overhead		26,966
Total manufacturing costs		$202,594

The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.

(a)

Compute all of the materials and labor variances.

Total materials variance		$		FavorableNeither favorable nor unfavorableUnfavorable
Materials price variance		$		FavorableNeither favorable nor unfavorableUnfavorable
Materials quantity variance		$		FavorableNeither favorable nor unfavorableUnfavorable
Total labor variance		$		FavorableUnfavorableNeither favorable nor unfavorable
Labor price variance		$		FavorableNeither favorable nor unfavorableUnfavorable
Labor quantity variance		$		FavorableUnfavorableNeither favorable nor unfavorable

(b)

Compute the total overhead variance.

Total overhead variance

$

FavorableNeither favorable nor unfavorableUnfavorable

Answer 1

Solution b:

Total overhead variance = Total overhead applied - Actual overhead

= (3700*2*$12) - ($63,934 + $26,966)

= $2,100 Unfavorable