Question

Kropf Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. Inputs Direct materials Direct labor Variable manufacturing overhead Standard Quantity or Hours per Unit of Output 9. 10 liters 0.60 hours 0.60 hours Standard Price or Rate $ 8.70 per liter $38.70 per hour $ 7.60 per hour The company has reported the following actual results for the product for September: Actual output Raw materials purchased Actual cost of raw materials purchased Raw materials used in production Actual direct labor-hours Actual direct labor cost Actual variable overhead cost 11, 300 units 104, 700 liters $929, 500 102, 860 liters 6,500 hours $255, 302 $ 44, 414 Required: a. Compute the materials price variance for September. b. Compute the materials quantity variance for September. c. Compute the labor rate variance for September d. Compute the labor efficiency variance for September. e. Compute the variable overhead rate variance for September. f. Compute the variable overhead efficiency variance for September. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) a. Materials price variance b. Materials quantity variance c. Labor rate variance d. Labor efficiency variance e. Variable overhead rate variance f. Variable overhead efficiency variance

Answer 1

Answer -

Calculation of Variances for September

		Calculation	Amount	"F" for favorable, "U" for unfavorable
a.	Materials price variance	(Actual Quantity * Actual price) - (Actual Quantity * Standard Price) = $929500 [given] - (104700 liters * $8.70 per liter) = $929500 - $910890 = $18610	$18610	U
b.	Materials quantity variance	(Actual Quantity - Standard Quantity) * Standard Price = [102860 liters - (11300 units*9.10 liters per unit)] * $8.70 per liter = (102860 liters - 102830 liters) * $8.70 per liter = $261	$261	U
c.	Labor rate variance	(Actual Hours * Actual Rate) - (Actual Hours * Standard Rate = $255302 [given] - (6500 hours * $38.70 per hour) = $255302 - $251550 = $3752	$3752	U
d.	Labor efficiency variance	(Actual Hours - Standard Hours) * Standard Rate = [6500 hours - (11300 units*0.60 hours per unit)] * $38.70 per hour = (6500 hours - 6780 hours) * $38.70 per hour = $10836	$10836	F
e.	Variable overhead rate variance	(Actual Hours * Actual Rate) - (Actual Hours * Standard Rate = $44414 [given] - (6500 hours * $7.60 per hour) = $44414 - $49400 = $4986	$4986	F
f.	Variable overhead efficiency variance	(Actual Hours - Standard Hours) * Standard Rate = [6500 hours - (11300 units*0.60 hours per unit)] * $7.60 per hour = (6500 hours - 6780 hours) *  $7.60 per hour = $2128	$2128	F