Question

Use the following data for questions 25 thru 31:

Cox Engineering performs cement core tests in its laboratory. The following standards have been set for each core test performed based on planned activity of 1,800 core tests:

(Standard Hours or Quantity = SH/Q, Standard Price or Rate = SP/R, Price Per Unit = PP/U).

Direct Materials: SH/Q = 3 pounds, SP/R = $0.75 per pound, PP/U = $2.25
Direct Labor: SH/Q = 0.4 hours, SP/R = $12 per hour, PP/U = $4.80
Variable Manufacturing Overhead: SH/Q = 0.4 hours, SP/R = $9 per hour, PP/U = $3.60
Fixed Manufacturing Overhead: SP/R = $6,800

During March, the laboratory performed 2,000 core tests. On March 1 no direct materials (sand) were on hand. Variable manufacturing overhead is assigned to core tests on the basis of standard direct labor-hours. The following events occurred during March:

• 7,200 pounds of sand were purchased at a cost of $6,120.
• 7,200 pounds of sand were used for core tests.
• 840 actual direct labor-hours were worked at a cost of $8,610.
• Actual variable manufacturing overhead incurred was $7,240.
• Actual fixed manufacturing overhead incurred was $6,500.

The variable manufacturing overhead price variance for March is:
A. $320 unfavorable
B. $320 favorable
C. $40 unfavorable
D. $40 favorable

Answer 1

The variable manufacturing overhead price variance for March is $40 favorable.

Step-by-step explanation:

Variable Manufacturing Overhead Price Variance

The variable manufacturing overhead price variance for March can be calculated by comparing the actual cost per unit of variable manufacturing overhead with the standard cost per unit. The formula for calculating the variance is:

Variance = (Actual Cost per Unit - Standard Cost per Unit) * Actual Quantity

In this case, Variable Manufacturing Overhead Price Variance=$7,240−($9×840)

Variable Manufacturing Overhead Price Variance=$7,240−$7,560

Variable Manufacturing Overhead Price Variance=$7,240−$7,560

Variable Manufacturing Overhead Price Variance=−$320

Variable Manufacturing Overhead Price Variance=−$320

The result is −$320

−$320, which means that the variable manufacturing overhead price variance for March is $320 unfavorable. Therefore, the correct answer is:

A. $320 unfavorable