Question

chapter 15. problem 19

Calculate variable cost variances—explain results The standards for one case of Springfever Tonic are as follows:

Direct materials . . . . . . . . . . . . . . . . . . . . 4 lb @ $5.00/lb = $20

Directlabor....................... 3hr@$13.00/hr =$39 Variable overhead (based

ondirectlaborhours) ............. 3hr@$6.00/hr =$18

During the week ended August 28, the following activity took place:

7,400 lb of raw materials were purchased for inventory at a cost of $4.95 per pound.
2,000 cases of finished product were produced.
8,300 lb of raw materials were used.

5,800 direct labor hours were worked at a total cost of $78,300. $35,670 of actual variable overhead costs were incurred.

Required:

Calculate each of the following variances and provide plausible explanations for the results:

1. Price variance for raw materials purchased.

2. Raw materials usage variance.

3. Direct labor rate variance.

4. Direct labor efficiency variance.

5. Variable overhead spending variance.

6. Variable overhead efficiency variance.

Answer 1

1)	for direct materials
	a.	price and quantity variance
			Standard	-	Actual	*	Actual	=	Variance
			price		price		quantiy
materials price variance			5		4.95		7,400	=	370	F
			standard	-	Actual	*	Standard	=	Variance
			qty		qty		price
materials quantity variance			8000		8,300		5		1500	U
2)	for direct labor
			Standard	-	Actual	*	Actual	=	Variance
			rate		rate		hours
labor price variance			13		13.5		5800	=	2900	U
			standard	-	Actual	*	Standard	=	Variance
			hours		hours		rate
labor efficiency variance			6000		5,800		13		2600	F
3)	for variable overhead
			Standard	-	Actual	*	Actual	=	Variance
			rate		rate		hours
Variable overhead rate			6		6.15		5,800	=	870	U
			standard	-	Actual	*	Standard	=	Variance
			hours		hours		rate
variable overhead efficiency			6000		5,800		6		1200	F