Question

1. The following information is available for Krane, Inc.

	Standard	Actual
DM Cost	$6/foot	$4,484
DM Quantity	4 feet/unit	760 feet
DL Rate	$8.50/hour	$9.20/hour
DL Hours	2.4 hours/unit	450 hours
Variable OH Rate	$5.75/direct labor hour	$2,500
Variable OH Quantity	2.4 direct labor hours/unit
Fixed OH Cost (based on DLH)	$1,300 budgeted	$1,600

Fixed overhead is based on DLH. The capacity is 400 DLH. The company produced and sold 180 units of its product.

Calculate the following favorable or unfavorable:

1. DM Cost Variance:                                                _________________________________
2. DM Price Variance:                                               _________________________________
3. DM Quantity Variance:                                        _________________________________
4. DL Cost Variance:                                                  _________________________________
5. DL Rate Variance:                                                  _________________________________
6. DL Efficiency Variance:                                         _________________________________
7. Variable OH Cost Variance:                                _________________________________
8. Variable OH Spending Variance:                       _________________________________
9. Variable OH Efficiency Variance:                      _________________________________
10. Fixed OH Cost Variance:                                      _________________________________
11. Fixed OH Budget Variance:                                 _________________________________
12. Fixed OH Volume Variance:                                _________________________________

Answer 1

Solution:

Direct Material Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AQ *	AP =				AQ *	SP =				SQ *	SP =
760	$5.90	$4,484.00			760	$6.00	$4,560.00			720	$6.00	$4,320.00
			$76.00	F				$240.00	U
			Direct Material Price Variance					Direct Material Qty variance
Direct material price variance					$76.00	F
Direct material quantity variance					$240.00	U
Direct material cost variance					$164.00	U

Direct Labor Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
450	$9.20	$4,140.00			450	$8.50	$3,825.00			432	$8.50	$3,672.00
			$315.00	U				$153.00	U
			Direct Labor rate Variance					Direct Labor Efficiency Variance
Direct Labor Rate variance					$315.00	U
Direct Labor Efficiency variance					$153.00	U
Direct labor cost variance					$468.00	U

Variable Overhead Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
450	$5.56	$2,500.00			450	$5.75	$2,587.50			432	$5.75	$2,484.00
			$87.50	F				$103.50	U
			Variable overhead rate variance					Variable overhead efficiency variance
Variable overhead rate variance					$87.50	F
Variable overhead efficiency variance					$103.50	U
Variable overhead cost variance					$16.00	U

Fixed Overhead Cost Variance

Actual Fixed OH Cost

Budgeted Fixed Overhead

Standard Cost (FOH Applies)

SH*

BR

$1,600.00

$1,300.00

432

$3.25

$1,404.00

$300.00

U

$104.00

F

Fixed overhead Budget Variance

Fixed overhead volume variance

Fixed overhead Budget Variance

$300.00

U

Fixed overhead volume variance

$104.00

F

Total Fixed overhead variance

$196.00

F