Question

Xavier Company produces a single product. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. The standard costs for one unit of product are as follows: Direct material: 6 ounces at $0.50 per ounce . . . . . . . . . . . . . . . . . . $3 Direct labor: 1.8 hours at $10 per hour . . . . . . . . . . . . . . . . . . . . . . . 18 Variable manufacturing overhead: 1.8 hours at $5 per hour . . . . . . . 9 Total standard variable cost per unit . . . . . . . . . . . . . . . . . . . . . . . . . $30 During June, 2,000 units were produced. The costs associated with June’s operations were as follows: Material purchased: 18,000 ounces at $0.60 per ounce . . . . . . . $10,800 Material used in production: 14,000 ounces . . . . . . . . . . . . . . . . . — Direct labor: 4,000 hours at $9.75 per hour . . . . . . . . . . . . . . . . . $39,000 Variable manufacturing overhead costs incurred . . . . . . . . . . . . . $20,800 Required: Compute the direct materials, direct labor, and variable manufacturing overhead variances.

Answer 1

Solution

Material Price Variance	$           1,800.00	Unfavourable-U
Material quantity variance	$           1,000.00	Unfavourable-U
Total Material Variance	$           4,800.00	Unfavourable-U
Labor rate variance	$           1,000.00	Favourable-F
Labor Efficiency variance	$           4,000.00	Unfavourable-U
Total Labor variance	$           3,000.00	Unfavourable-U
Variable Overhead Rate Variance	$               800.00	Unfavourable-U
Variable Overhead Efficiency Variance	$           2,000.00	Unfavourable-U
Variable Overhead Spending Variance	$           2,800.00	Unfavourable-U

Working

		2000	Items
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	18000	$            0.60	$ 10,800
Direct labor	4000	$            9.75	$ 39,000
Variable Overhead	4000	$            5.20	$ 20,800

Standard DATA for		2000	Items
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 6 ounces x 2000 Items)=12000 ounces	$              0.50	$               6,000.00
Direct labor	( 1.8 hours x 2000 Items)=3600 hours	$           10.00	$            36,000.00
Variable Overhead	( 1.8 hours x 2000 Items)=3600 hours	$              5.00	$            18,000.00

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    0.50	-	$                     0.60	)	x	18000
	-1800
	Variance		$             1,800.00			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	12000	-	14000	)	x	$              0.50
	-1000
	Variance		$             1,000.00			Unfavourable-U
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$            6,000.00	-	$           10,800.00	)
	-4800
	Variance		$             4,800.00			Unfavourable-U
Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                  10.00	-	$                     9.75	)	x	4000
	1000
	Variance		$             1,000.00			Favourable-F
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	3600	-	4000	)	x	$           10.00
	-4000
	Variance		$             4,000.00			Unfavourable-U
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$         36,000.00	-	$           39,000.00	)
	-3000
	Variance		$             3,000.00			Unfavourable-U
Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                    5.00	-	$                     5.20	)	x	4000
	$             (800.00)
	Variance		$                 800.00			Unfavourable-U
Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	3600	-	4000	)	x	$              5.00
	$         (2,000.00)
	Variance		$             2,000.00			Unfavourable-U
Variable Overhead Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$         18,000.00	-	$           20,800.00	)
	-2800
	Variance		$             2,800.00			Unfavourable-U