Question

The following data reflect the current month’s activity for Vickers Corporation.

Actual total direct labor	$	688,940
Actual hours worked		37,000
Standard labor-hours allowed for actual output (flexible budget)		35,600
Direct labor price variance	$	14,060	F
Actual variable overhead	$	165,200
Standard variable overhead rate per standard direct labor-hour	$	4.50

Variable overhead is applied based on standard direct labor-hours allowed.

Required:

Compute the labor and variable overhead price and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Answer 1

Direct Labor Rate Variance = $14060 (F) ….... (given)
Direct Labor Rate Varaince = Actual Hours * (Standard Rate Per Hour - Actual Rate Per Hour)
$14060 =37,000*(Standard Rate - [688,940/37000])
$14060 =(37,000*Standard Rate) - 688940
Standard Rate = $19 per hour
Direct Labor Efficiency Varaince = Standard Rate Per Hour * (Standard Hours For Actual Units Produced - Actual Hours)
=$19* (35,600-37,000)
=$26600 (U)

Variable Overheads Rate Varaince = Actual Hours * (Standard Rate Per Hour - Actual Rate Per Hour)
	=37000* (4.50 - [165,200/37,000])
	=$166500 -165200
	=$1300 (F)
Variable Overheads Efficiency Varaince = Standard Rate Per Hour * (Standard Hours For Actual Units Produced - Actual Hours)
	=$4.50*(35600-37000)
	=$6300(U)