Question

yandard and actual costs per unit are provided below for the most recent period Brod 500 units were acully produced Product Standard Cost Product Actual Cost $8.00 Metres 4 4.1 Hours 3 3.2 Materials Standard Actual Direct labour Standard Actual Variable overhead Standard Actual Total unit cost Unit Price Per Metre $2.00 $1.90 Hourly Rate $7.00 $6.50 $7.79 $21.00 3 $20.80 Hours Hourly Rate $6.00 $3.00 $3.10 2.2 $6.82 $35.41 $35.00 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-

Answer 1

1. Materials price variance = (Actual quantity purchased * Actual price) - (Actual quantity purchased * Standard price)

= [(4.1 * $1.9) - (4.1 * $2)] * 500 units

= $205 Favorable

2. Materials quantity variance = (Actual quantity used * Standard price) - (Standard quantity * Standard price)

= [(4.1 * $2) - (4 * $2)] * 500 units

= $100 Unfavorable

3. Direct labour rate variance = (Actual hours * Actual rate) - (Actual hours * Standard rate)

= [(3.2 * $6.5) - (3.2 * $7)] * 500 units

= $800 Favorable

4. Direct labour efficiency variance = (Actual hours * Standard rate) - (Standard hours * Standard rate)

= [(3.2 * $7) - (3 * $7)] * 500 units

= $700 Unfavorable

5. Variable overhead rate variance = (Actual hours * Actual rate) - (Actual hours * Standard rate)

= [(2.2 * $3.1) - (2.2 * $3)] * 500 units

= $110 Unfavorable

6. Variable overhead efficiency variance = (Actual hours * Standard rate) - (Standard hours * Standard rate)

= [(2.2 * $3) - (2 * $3)] * 500 units

= $300 Unfavorable