Question

having trouble with 5-8

Versailles Company produces a product that relies on a standard cost system for planning and control. The following are the standards for producing one unit of product. VERSAILLES COMPANY STANDARDS FOR PRODUCTION OF ONE UNIT OF PRODUCT Standard Standard Standard Quantity of Price Cost Input of Input Per Unit Direct Materials 3 units S 10.00 S 30.00 Direct Labor 1.0 hours 8.00 8.00 Variable Manufacturing Overhead 1.0 hours 5.00 5.00 Fixed Manufacturing Overhead 1.0 hours 20.00 20.00 During the period, the company recorded the attached activity in connection with the production of its product. VERSAILLES COMPANY ACTUAL ACTIVITY FOR PRODUCTION DURING PERIOD (a) The company purchased 10,000 units of direct materials at a total cost of $108,000. The company used 8,900 units of direct materials in producing the product. (b) A total of 2,800 hours of direct labor were recorded at an average actual rate of $8.75 per hour. (c) | The company actually produced 3,000 units of output during the year. (d) The actual variable manufacturing overhead incurred was $17,500 and the actual fixed manufacturing overhead incurred was $61,200. (e) The company calculated its manufacturing overhead rates using a normal capacity of 3,500 direct labor hours.

Answer 1

A	MATERIAL VARIANCE
1	MATERIAL PRICE VARIANCE
	FORMULA:	(STANDARD PRICE PER UNIT - ACTUAL PRICE PER UNIT) * ACTUAL QUANTITY PURCHASED
	STANDARD PRICE PER UNIT	$         10.00
	ACTUAL PRICE PER UNIT	$         10.80	108000/10000
	ACTUAL QUANTITY PURCHASED	10,000
	MATERIAL PRICE VARIANCE	= (10 -10.8)*10,000
		$       (8,000)	UNFAVORABLE
2	MATERIAL QUANTITY VARIANCE
	FORMULA:	(STANDARD MATERIAL REQUIRED - ACTUAL UNIT USED ) * STANDARD PRICE OF MATERIAL PER UNIT
	STANDARD PRICE OF MATERIAL PER UNIT	$         10.00
	ACTUAL UNIT USED	8,900
	STANDARD MATERIAL REQUIRED	' = 3000 * 3 = 9000
	MATERIAL QUANTITY VARIANCE	= (9000-8900)*10
		$         1,000	FAVORABLE

B	LABOR VARIANCE
1	LABOR RATE VARIANCE
	FORMULA:	(STANDARD RATE PER HOUR - ACTUAL RATE PER HOUR)* ACTUAL LABOR HOURS USED
	STANDARD RATE PER HOUR	$            8.00
	ACTUAL RATE PER HOUR	$            8.75
	ACTUAL LABOR HOURS USED	2,800
	LABOR RATE VARIANCE	= (8 - 8.75) *2800
		$       (2,100)	UNFAVORABLE
	THE RATE OF PER HOUR HAS INCREASED DUE TO WHICH LABOR RATE VARIANCE IS UNFAVORABLE.
2	LABOR EFFICIENCY VARIANCE
	FORMULA:	(STANDARD LABOR HOURS REQUIRED - ACTUAL LABOR HOURS USED ) * STANDARD RATE PER HOUR
	STANDARD RATE PER HOUR	$            8.00
	ACTUAL LABOR HOURS USED	2,800
	STANDARD LABOR HOURS REQUIRED	= 1 *3000 = 3000 HOURS
	LABOR EFFICIENCY VARIANCE	= (3000-2800)*8
		$         1,600	FAVORABLE
	THE ACTUAL LABOR HOURS USED IS LESS DUE TO WHICH LABOR USAGE VARIANCE IS FAVORABLE.

Variable overhead efficiency variance = SR × (SH-AH)
SR = Standard variable manufacturing overhead rate = $5.00
AH = Actual hours worked during the period = 2,800
SH = Standard hours allowed for actual output or production = 3,000
Variable overhead efficiency variance = SR × (SH-AH) = 5.00 (3,000 -2,800)
5*200
$                                                                                                                                              1,000.00	FAVORABLE

Variable Overhead Spending variance = (Standard Rate * Actual Hour - Actual Rate * Actual Hour ) = AH (SR-AR)
AR = 17,500/2800	$            6.25
AH = Actual hours worked during the period = 2,800
SR = Standard variable manufacturing overhead rate = $5.00
Variable overhead spending variance =	2800 ( 5.00 - 6.25)
	$ (3,500.00)
	unfavorable

Fixed overhead efficiency variance = SR × (SH-AH)
SR = Standard variable manufacturing overhead rate = $20.00
AH = Actual hours worked during the period = 2,800
SH = Standard hours allowed for actual output or production = 3,000
Fixed overhead efficiency variance = SR × (SH-AH) = 20.00 (3,000 -2,800)
20*200
$                                                                                                                                    4,000.00	FAVORABLE

Fixed Overhead Spending variance = (Standard Rate * Actual Hour - Actual Rate * Actual Hour ) = AH (SR-AR)
AR = 61,200/2800	$                     21.86
AH = Actual hours worked during the period = 2,800
SR = Standard variable manufacturing overhead rate = $20.00
Fixed overhead spending variance =	2800*(20-21.86)
	$            (5,208.00)
	unfavorable