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Fortes Inc. has provided the following data concerning one of the products in its standard cost system. Materials price variances is calculated on material purchased and materials quantity is based on Material used in production. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. Inputs Standard Quantity or Hours per Unit of Output Standard Price or Rate Direct materials 8.7 ounces $ 6.80 per ounce Direct labor 0.6 hours $ 28.70 per hour Variable manufacturing overhead 0.60 hours $ 5.10 per hour The company has reported the following actual results for the product for April: Actual output 6300 units Raw materials purchased 48,900 ounces Actual cost of raw materials purchased $ 316,540 Raw materials used in production 54,840 ounces Actual direct labor-hours 3530 hours Actual direct labor cost $ 105,850 Actual variable overhead cost $ 17,090

Required:

a. Compute the materials price variance for April.
b. Compute the materials quantity variance for April.
c. Compute the labor rate variance for April.
d. Compute the labor efficiency variance for April.
e. Compute the variable overhead rate variance for April.
f. Compute the variable overhead efficiency variance for April.

1 Answer

6 votes

Answer:

a. Material price variance

= (Standard price - Actual price) x Actual quantity purchased

= ($6.80 - $6.473210634) x 48,900 ounces

= $15,980(F)

b. Material quantity (usage) variance

= (Standard quantity - Actual quantity used) x Standard price

= (8.70 x 6,300 - 54,840) x $6.80

= $204(A)

c. Labour rate variance

= (Standard rate - Actual rate) x Actual hour worked

= ($28.70 - $2.998583569 x 3,530 hrs

= $7,010 (A)

d. Labour efficiency variance

= (Standard hours - Actual hours) x Standard rate

= (0.6 x 6,300 - 3,530) x $28.70

= $7,175 (F)

e. Variable overhead rate variance

= (Standard rate - Actual rate) x Actual hours

= ($5.10 - $4.841359773) x 3,530

= $17,090 (F)

f. Variable overhead efficiency variance

= (Standard hours - Actual hours) x Standard rate

= (0.6 x 6300 - 3,530) x $5.10

= $1,275

Step-by-step explanation:

Material price variance is the difference between standard price and actual price multiplied by actual quantity purchased. Actual price is obtained by dividing cost of direct material purchased by quantity purchased.

Material quantity variance is the difference between standard quantity and actual quantity used multiplied by standard price. Standard quantity is obtained by multiplying standard quantity per unit by actual output.

Labour rate variance is the difference between standard rate and actual rate multiplied by actual hours.

Labour efficiency variance is the difference standard hours and actual hours worked multiplied by standard rate. Standard hours are obtained by multiplying standard hours per unit by actual output,

Variable overhead rate variance is the difference between standard variable overhead rate and actual variable overhead rate multiplied by actual hours.

Variable overhead efficiency variance is the difference between standard hours and actual hours multiplied by standard variable overhead rate.

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