Question

rsailles Company produces a product that relies on a standard cost system for planning ntrol. 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 $ 12.00 S 36.00 Direct Labor 1.0 hours 10.00 10.00 Variable Manufacturing Overhead 1.0 hours I 6.00 6.00 Fixed Manufacturing Overhead 1.0 hours 18.00 18.00 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 The company purchased 10,000 units of direct materials at a total cost of S121.000. The company used 8,900 units of direct materials in producing the product (a) (b) (c) (d) A total of 2,800 hours of direct labor were recorded at an average actual rate of S10.50 per hour. The company actually produced 3,000 units of output during the year. The actual variable manufacturing overhead incurred was $17,000 and the actual fixed manufacturing overhead incurred was $53,200. The company calculated its manufacturing overhead rates using a normal capacity of 3,500 direct labor hours. (e)

Answer 1

calculation of direct material price variance:

= (Standard price per unit of material - Actual price per unit of material) × Actual quantity

= ($12 - $12.1 ) × 10000 = $1000 U F

* Actual Cost /Unit= $121000/10000=$12.10/Unit

Calculation of direct material quantity variance

=(standard quantity of material required for actual production - actual quantity used) × Standard price per unit

((3Unit X 3000Unit)-8900 Unit )X $12 = $1200 F

Calculation of direct labor rate variance

= (Standard direct labor rate per hour - actual direct labor rate per hour) × Actual hours used

= ($10/hour - $10.50/hour) × 2800 Hours= $1400 UF

Calculation of direct labor efficiency variance:

= (standard hours required for actual production - actual hours used) × standard Rate

= (1 Hour × 3000 Unit - 2800) × $10 = $2000 F

Calculation of Variable OH rate variance

= (Standard Variable OH per hour - actual variable OH per hour) × Actual hours used

= ($6/hour - $6.07/hour) × 2800 Hours= $196U F

* Actual Cost /Hour= $17000/2800=$6.07/Hour

Calculation of Variale OH efficiency variance:

= (standard hours required for actual production - actual hours used) × standard Rate

= (1 Hour × 3000 Unit - 2800) × $6= $1200 F

Fixed OH Spending Variannce = Budgeted   OH- Actul OH

((1 Hour X3500 X18)-$53200=$9800 F

Fixed OH Volume Variannce = Applied    OH- Budgeted OH

((1 Hour X3000 X18)-(1HourX 3500X18)=$9000 UF