Hector Company has developed the following standard costs for its product for 2019: HECTOR COMPANY Standard Cost Card...
Hector Company has developed the following standard costs for
its product for 2019:
| HECTOR COMPANY Standard Cost Card |
|||||||||||||||
| Product A | |||||||||||||||
| Cost Element | Standard Quantity | × | Standard Price | = | Standard Cost | ||||||||||
| Direct materials | 4 pounds | $3 | $12 | ||||||||||||
| Direct labor | 3 hours | 8 | 24 | ||||||||||||
| Manufacturing overhead | 3 hours | 4 | 12 | ||||||||||||
| $48 | |||||||||||||||
The company expected to produce 30,000 units of Product A in 2020
and work 90,000 direct labor hours.
| Actual results for 2020 are as follows: | |||
| • | 31,000 units of Product A were produced. | ||
| • | Actual direct labor costs were $746,200 for 91,000 direct labor hours worked. | ||
| • | Actual direct materials purchased and used during the year cost $346,500 for 126,000 pounds. | ||
| • | Actual variable overhead incurred was $155,000 and actual fixed overhead incurred was $205,000. | ||
Compute the following variances showing all computations to support
your answers. Indicate whether the variance are favorable or
unfavorable?
| (a) | Materials Quantity Variance | $
|
|
|||
| (b) | Total Direct Labor Variance | $
|
|
|||
| (c) | Direct Labor Quantity Variance | $
|
|
|||
| (d) | Direct Materials Price Variance | $
|
|
|||
| (e) | Total Overhead Variance | $
|
|
Homework Answers
a. Material quantity variance = (31000*4-126000)*3 = 6000 unfavorable
b. Total direct labor variance = 746200 - 31000*24 = 2200 favorable
c. Direct labor quantity variance = (31000*3-91000)*8 = 16000 favorable
d. Direct material price variance = (3-346500/126000)*126000 = 31500 favorable
e. Total overhead variance = 31000*12 - 155000-205000 = 12000 favorable
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