Question

3. Lido Company's standard and actual costs per unit for the most recent period, during which 400 units were actually produced, are given below: Standard Actual Materials: Standard: 2 foot at $1.50 per foot $ 3.00 Actual: 2.1 foot at $1.60 per foot... $3.36 Direct labor: Standard: 1.5 hours at $6.00 per hour 9.00 Actual: 1.4 hours at $6.50 per hour... 9.10 Variable overhead: Standard: 1.5 hours at $3.40 per hour 5.10 Actual: 1.4 hours at $3.10 per hour... Total unit cost...... S1710 $16.80 Required: (15%) From the foregoing information, compute the following variances. Show whether the variance is favorable (F) or unfavorable (U): a. Materials price variance. b. Materials quantity variance. c. Direct labor rate variance. d. Direct labor efficiency variance. e. Variable overhead rate variance. f. Variable overhead efficiency variance.

Answer 1

a. Materials Price Variance = (Actual Quantity * Actual Price) - (Actual Quantity * Standard Price)

= (400 * 3.36) - (400 * 2.1 * 1.50)

= 1,344 - 1,260

= $84 Unfavorable

b. Materials Quantity Variance = (Actual Quantity * Standard Price) - (Standard Quantity * Standard Price)

= (400 * 2.1 * 1.50) - (400 * 3)

= 1,260 - 1,200

= $60 Unfavorable

c. Direct Labor Rate Variance = (Actual Hours * Actual Rate) - (Actual Hours * Standard Rate)

= (400 * 9.10) - (400 * 1.4 * 6)

= 3,640 - 3,360

= $280 Unfavorable

d. Direct Labor Efficiency Variance = (Actual Hours * Standard Rate) - (Standard Hours * Standard Rate)

= (400 * 1.4 * 6) - (400 * 9)

= 3,360 - 3,600

= $240 Favorable

e. Variable Overhead Rate Variance = (Actual Hours * Actual Rate) - (Actual Hours * Standard Rate)

= (400 * 4.34) - (400 * 1.4 * 3.4)

= 1,736 - 1,904

= $168 Favorable

f. Variable Overhead Efficiency Variance = (Actual Hours * Standard Rate) - (Standard Hours * Standard Rate)

= (400 * 1.4 * 3.4) - (400 * 5.1)

= 1,904 - 2,040

= $136 Favorable