Question

Sweetwater Company manufactures two products, Mountain Mist and Valley Stream. The company prepares its master budget on the basis of standard costs. The following data are for March: Standards Sales per unit Sales in units Direct Material Direct Labor Variable Overhead (per direct labor hour) Mountain Mist 145 per unit 1800 3 ounces at 15 per ounce 5 hours at 60 per hour 48 Valley stream 102 per unit 3400 4 ounces at 7 16.50 per ounce 6 hours at 75 per hour 52.50 Actual Mountain Mist Valley stream Sales (In Total) 300,000 350,000 Sales (In units) 2000 3500 Direct Material 3100 ounces at 13.50 per 4700 ounces at 17.25 per hour ounce Direct Labor 4900 hours at 60.75 per hour 7400 hours at 76.50 per hour Variable Overhead (Total in ) 242,550 378,510 Units produced (Actual) 1000 units 1000 units Indicate whether the variances are favorable (F) or unfavorable (U) to the performance of the plant. Note: Sales (in units) to be used only for the sales variance.

a. Calculate the direct materials price variance.
b. Calculate the direct materials usage variance.
c. Calculate the direct labor rate variance.
d. Calculate the direct labor efficiency variance.
e. Calculate the variable overhead rate variance.
f. Calculate the variable overhead efficiency variance.
g. Calculate the Sales Price variance
h. Calculate the Sales Quantity Variance

Answer 1

a. Computation of Direct material Price Variance:

Direct material Price Variance = (Standard Price-Actual Price)*Actual Quantity purchased

Mountain Mist

Standard price per ounce	A	$15.00
Actual Price per Ounce	B	$13.50
Actual ouce Purchased	C	3,100
Direct material Price Variance	(A-B)*C	$4,650	i.e. Favorable

Valley Stream

Standard price per ounce	A	$16.50
Actual Price per Ounce	B	$17.25
Actual ouce Purchased	C	4,700
Direct material Price Variance	(A-B)*C	-$3,525	i.e. Unfavorable

b. Computation of Direct material Usage/Quantity Variance:

Direct material Quantity/Usage Variance = (Standard Quantity for actual production-Actual quantity used)*Standard Price

Mountain Mist

Standard Material of Ounce	A = 1,000 Units *3 Ounce	3,000
Actual ouce Purchased	B	3,100
Standard price per ounce	C	$15.00
Direct material Quantity Variance	(A-B)*C	-$1,500	i.e. Unfavorable

Valley Stream

Standard Material of Ounce	A = 1,000 Units *4 Ounce	4,000
Actual ouce Purchased	B	4,700
Standard price per ounce	C	$16.50
Direct material Quantity Variance	(A-B)*C	-$11,550	i.e. Unfavorable

c. Computation of Labor Rate Variance:

Direct Labor Price Variance = (Standard Rate-Actual Rate)*Actual hours worked

Mountain Mist

Standard Rate per hour	A	$60.00
Actual Rate per hour	B	$60.75
Actual hours worked	C	4900
Direct Labor Price Variance	(A-B)*C	-$3,675	i.e. Unfavorable

Valley Stream

Standard Rate per hour	A	$75.00
Actual Rate per hour	B	$76.50
Actual hours worked	C	7400
Direct Labor Price Variance	(A-B)*C	-$11,100	i.e. Unfavorable

d. Computation of Labor Efficiency Variance:

Direct labor Efficiency Variance = (Standard hours for actual production -Actual hours)*Standard Rate

Mountain Mist

Standard hours for actual units produced	A = 1,000 Units * 5 Hours	5,000
Actual hours worked	B	4,900
Standard rate per hour	C	$60.00
Direct labor Efficiency Variance	(A-B)*C	$6,000	i.e. Favorable

Valley Stream

Standard hours for actual units produced	A = 1,000 Units * 6 Hours	6,000
Actual hours worked	B	7,400
Standard rate per hour	C	$75.00
Direct labor Efficiency Variance	(A-B)*C	-$105,000	i.e. Unfavorable

As per the Chegg's Policy, 4 parts can be solved for one question. Please post another query for the remaining parts.