Question

Standard Price and Volume Standards: Direct materials 21.0 yards per awning at $15.00 per yard Direct labor 5.0 hours per awning at $17.00 per hour Variable MOH standard rate $4.00 per direct labor hour Predetermined fixed MOH standard rate $7.00 per direct labor hour Total budgeted fixed MOH cost $78,200 Print Done X Actual Results 1 Purchased 51,750 yards at a total cost of $755,550 Used 47,500 yards in producing 2,300 awnings Actual direct labor cost of $194,256 for a total of 11,360 hours Actual variable MOH $48,848 Actual fixed MOH $83,200 Print Done Pratt Awning manufactures standard cost system. The company allocates overhead based on the number of direct labor hours. The following are the companv's cost and standards data: Actual cost and operating data from the most recent month are as follows: (Click the icon to view the actual results.) Click the icon to view the standards.) allocated on the basis of direct labor hours All manufacturing overhead Read the requirements. one awning. Requirement 1. Calculate the standard cost Standard cost Standard cost per unit Direct materials Direct labor Variable MOH Fixed MOH Total standard cost (Enter the Requirement 2a. Calculat favorable (F) or unfavorable (U). Abbreviations used: DM Direct materials.) direct material varianc s as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variance as First determine the formula for the price variance, then compute the price variance for direct materials. DM price variance x Determine the formula for the quantity variance, then compute the quantity variance for direct materials DM quantity variance = Requirement 2b. Calculate the direct labor variances. (Enter the variances favorable (F) or unfavorable (U). Abbreviations used: DL s positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variance as Direct labor.) First determine the formula r the rate variance, then compute the rate variance for direct labor. DL rate variance x ( First determine the formula for the efficiency variance, then compute the efficiency variance for direct labor. x( DL efficiency variance X I Requirement 2c. Calculate the variable manufacturing overhead variances. (Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U).k First determine the formula for the rate variance, then compute the rate variance for variable manufacturing overhead. (Round interim calculations to the nearest cent.) Variable overhead x( rate variance Now compute the variable manufacturing overhead efficiency variance. First determine the formula for the efficiency variance, then compute the efficiency variance for variable manufacturing overhead. Variable overhead x efficiency variance Requirement 2d. Calculate the fixed manufacturing overhead variances. (Enter the variance as a positive number. Label the variance as favorable (F) or unfavorable (U).) Begin by computing the fixed manufacturing overhead budget variance. First determine the formula for the budget variance, then compute the budget variance for fixed manufacturing overhead. Fixed MOH budget variance Now compute the fixed manufacturing overhead volume variance. First determine the formula for the volume variance, then compute the volume variance for fixed manufacturing overhead Fixed MOH =volume variance Variable manufacturing overhead: Meaning Possible explanation Variance VOH rate VOH efficiency Fixed manufacturing overhead: Possible explanation Variance Meaning FOH budget FOH volume Are any of the variances likely to be interrelated? . This may have resulted in variance. It is likely that Pratt Awning variance The likely to be related to the

Answer 1

Req 1
	Standard Cost			Standard Cost
				per unit
	D.Materials			$ 315.00	(21 x $ 15)
	D.Labor			$    85.00	(5 x $ 17)
	Variable MOH			$    20.00	(5 x $ 4)
	Fixed MOH			$    35.00	(5 x $ 7)
	Total Standard Costs			$ 455.00

Req 2

Data for Material, Labor and Variable OH variances

Standard ( per awning)

Standard ( 2300 awning)

Actual ( 2300 awning)

Particulars

Qty/ Hrs

Rate/Price

Amount

Qty/ Hrs

Rate/Price

Amount

Qty/ Hrs

Rate/Price

Amount

Material

21

$         15.00

$ 315.00

48300

$       15.00

$ 724,500.00

47500

$       14.60

$ 693,500.00

Labor

5

$         17.00

$    85.00

11500

$       17.00

$ 195,500.00

11360

$       17.10

$ 194,256.00

V.OH

5

$            4.00

$    20.00

11500

$         4.00

$    46,000.00

11360

$          4.30

$    48,848.00

Calculation of Variances

D.Material Quantity Variance =

( Standard Quantity - Actual Quantity ) x Standard Price

=

( 48300 - 47500) x $ 15

=

$ 12,000.00

(F)

D.Material Price Variance =

( Standard Price - Actual Price) x Actual Quantity

=

( $ 15 - $ 14.6) x 47500

=

$ 19,000.00

(F)

D.Labor Rate variance =

(Standard rate - Actual rate) x Actual Hours

=

($ 17 - $ 17.1 ) x 11360

=

$   1,136.00

(U)

D.Labor Efficiency variance =

(Standard Hours - Actual Hours) x Standard rate

=

(11500 - 11360) x $ 17

=

$   2,380.00

(F)

V.OH Rate Variance =

(Standard rate - Actual rate) x Actual Hours

=

($ 4 - $ 4.3) x 11360

=

$   3,408.00

(U)

V.OH Efficiency Variance =

(Standard Hours - Actual Hours) x Standard rate

=

(11500 - 11360) x $ 4

=

$       560.00

(F)

Data for Fixed OH variances
Recovery Rate		$            7.00
Budgeted OH		$ 78,200.00	(Given)
Actual Hours		11360	(Actual D.L hours)
Recovered OH		$ 79,520.00	( 11360 x $ 7)
Actual OH		$ 83,200.00	(Given)
Fixed MOH Variances
Fixed MOH budget Variance =			Budgeted OH - Actual OH
		=	$ 78200 - $ 83200
		=	$ 5,000.00	(U)
Fixed MOH volume Variance =			Recovered OH - Budgeted OH
		=	$ 79520 - $ 78200
		=	$ 1,320.00	(F)

Req 3 D.M Price variance Meaning Material Price Variance is the difference between the standard price and the actual price for the actual quantity of materials used for production. Materail is purchased at a lower price than what was set as standard Explanation bot D.M Quantity variance= A material quantity variance is the difference between the actual amount of materials used in the production process and the amount that was expected to be used. Meaning Explanation Lesser quanity was used to prepare the actual units than that was expected to be used

D.L. Rate Variance The labor rate variance measures the difference between the actual and expected cost of labor. Meaning Explanation Labors were employed at a higher rate than the standard rate D.L. Efficiency Variance Meaning Explanation tis the measure of difference between the standard cost of actual number of direct labor hours utilized during a period and the standard hours of direct labor for the level of output achieved Labors took less time to complete the actual units than the time that was expected from them to utilize v.OH Rate Variance Meaning Explanation The variable overhead rate variance is the difference between actual costs for variable overhead and budgeted costs based on the standards The company incurred V.OH at a higher rate than the rate that was set as standard v.OH Efficiency Variance Meaning It is the difference between the number of direct labor hours actually worked and what should have been worked based on the standards Explanation The labor worked more efficiently and as a result company incurred less V.OH than what was expected

F.OH Budget Variance Meaning Explanation Fixed overhead budget variance is the difference between total fixed overhead budgeted for a given accounting period and actual fixed overheads incurred during the period The company incurred more fixed expenses than what was budgeted at the first place F.OH Volume Variance Meaning The fixed overhead volume variance is the difference between the amount of fixed overhead actually applied to produced goods based on production volume, and the amount that was budgeted to be applied to produced goods Explanation The company has recognized more F.MOH than what was budgeted initially