Calculate variable cost variances—explain results The standards for one case of Springfever Tonic are:
Direct materials | 6 lbs.@ $5.00/lb. = $30 |
Direct labor | 5 hrs.@ $12.00/hr. = 60 |
Variable overhead (based on direct labor hours) | 5 hrs.@ $6.00/hr. =30 |
During the week ended March 28, the following activity took place:
16,000 lbs. of raw materials were purchased for inventory at a cost of $4.95 per pound.
2,500 cases of finished product were produced. 15,600 lbs. of raw materials were used.
12,200 direct labor hours were worked at a total cost of $152,500. $76,860 of actual variable overhead costs were incurred.
Required:
Calculate each of the following variances and provide plausible explanations for the results:
a. Price variance for raw materials purchased.
b. Raw materials usage variance.
c. Direct labor rate variance.
d. Direct labor efficiency variance.
e. Variable overhead spending variance.
f. Variable verhead efficiency variance.
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