Question

8. (16 points) The CengageCompany makes Elmotovs. It has developed the following per nit standard costs for 2019 for each item: Direct Dixest Manufacturing Labor Materials Overhead Standard Quantity 4 pounds 3 hours 3 hours $3.00/db $8.00/b $4.00/DLH Standard Price $24.00 Unit Standard Cost $12.00 $12.00 In 2019, the company expected to produce 20,000 units of toys and planned a level of 60,000 hours of direct labor Actual results for 2019 are presented below: 1. Direct materials purchased and used were 84,000 pounds at a cost of $235,200. 2. Direct labor costs were $518,500 for 61,000 direct labor hours actually worked. 3. Actual manufacturing overhead was $240,000 4. Actual production was 20,500 units. INSTRUCTIONS Compute the following variances: 1. Direct materials: total, price and quantity 2. Direct labor: total, price and quantity 3. Total overhead variance ction 14 points te SHOW ALL COMPUTATIONS OR NO CREDIT GIVEN The answer to this question could be submitted differently than what is presented here. For example-you could use the matrix approach Do not embed the formulas in the cells-you must write out the formulas. Place answer Show calculations here V 11(1) Total materials variance: 5 Materials price variance: 9Materials quantity variance: 71(3) total overhead variance

Answer 1

		Calculation	Answer
1	(1) Total material variance:	Actual total direct material cost – Total standard cost for actual quantity
2		=$ 235,200 - $ 12 x 20,500	($ 10,800)	F
3		=$ 235,200 - $ 246,000 = -$ 10,800
4
5	Material price variance:	(Actual price – Standard price) x Actual quantity	($ 16,800)	F
6		=($ 2.8 - $ 3) x 84,000
7		=- $ 0.2 x 84,000 = - $ 16,800
8
9	Material quantity variance:	(Actual quantity - Standard quantity) x Standard price per unit	$ 6,000	U
10		=(84,000 – 82,000) x $ 3
11		= 2,000 x $ 3 = $ 6,000
12
13	(2) Total labor variance:	Actual total labor cost – Total standard labor cost for actual quantity	$ 26,500	U
14		= $ 518,500 - $ 24 x 20,500
15		= $ 518,500 - $ 492,000 = $ 26,500
16
17	Labor price variance:	(Actual rate – Standard rate) x Actual labor hours	$ 30,500	U
18		= ($ 8.5 - $ 8) x 61,000
19		= $ 0.5 x 61,000 = $ 30,500
20
21	Labor quantity variance:	(Actual hours used - Standard hours allowed) x Standard rate	($ 4,000)	F
22		= (61,000 – 61,500) x $ 8
23		= -500 x $ 8 = - $ 4,000
24
25
26
27	Total overhead variance	Actual overhead – Total standard overhead allowed	($6,000)	F
		= $ 240,000 - $ 12 x 20,500
		= $ 240,000 - $ 246,000 = - $ 6,000

Explanation:

Total material variance = Actual total direct material cost – Total standard cost for actual quantity

                                          = $ 235,200 - $ 12 x 20,500 = $ 235,200 - $ 246,000

                                                                                           = -$ 10,800          F

                Actual price of direct material = Total material cost/Total units purchased

                                                               = $ 235,200/84,000 = $ 2.8/lb

                                                                                                                                    

Direct material price variance = (Actual price – Standard price) x Actual quantity

                                                      = ($ 2.8 - $ 3) x 84,000 = - $ 0.2 x 84,000 = - $ 16,800     F

Standard quantity of material required for actual production = Unit standard quantity x actual unit

                                                                                               = 4 x 20,500 = 82,000 pounds

Direct material quantity variance = (Actual quantity - Standard quantity) x Standard price per unit

                                                           = (84,000 – 82,000) x $ 3 = 2,000 x $ 3 = $ 6,000        U

Total material variance = Actual total labor cost – Total standard labor cost for actual quantity

                                          = $ 518,500 - $ 24 x 20,500 = $ 518,500 - $ 492,000

                                                                                           = $ 26,500     U

Actual labor rate = Total labor cost/total hour worked = $ 518,500/61,000 = $ 8.5 PLH

Direct labor price variance = (Actual rate – Standard rate) x Actual quantity

                                          = ($ 8.5 - $ 8) x 61,000 = $ 0.5 x 61,000 = $ 30,500     U

Standard labor hours allowed = Unit standard labor hour x Actual unit produced

                                               = 3 x 20,500 = 61,500 Hrs

Direct labor quantity variance = (Actual hours used - Standard hours allowed) x Standard rate

                                               = (61,000 – 61,500) x $ 8 = -500 x $ 8 = - $ 4,000        F

Total overhead variance = Actual overhead – Total standard overhead

                                       = $ 240,000 - $ 12 x 20,500 = $ 240,000 - $ 246,000 = - $ 6,000     F