Question

Tell Her I Said So, Ltd. has provided the following data concerning one of the products in its standard cost system. 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 4.2 grams $ 2.95 per gram Direct labor 1.25 hours $ 10.00 per hour Variable manufacturing overhead 1.25 hours $ 4.00 per hour The company planned to produce 10,800 units of output during June and has reported the following actual results for the product for June: Actual output 11,250 Units Raw materials purchased/used 46,000 grams Actual price of raw materials $ 3.05 per gram Actual direct labor-hours 16,875 Hours Actual direct labor rate $ 9.00 per hour Actual variable overhead rate $ 4.50 per hour Assume all of the materials purchased was used during the month to produce the 11,250 units. Calculate: a. The DM activity variance b. The DM spending variance c. The DM price variance d. The DM quantity variance

Answer 1

Step-by-step explanation:

Given details:

Standard Quantity ()SQ = Expected Consumption for Actual output=4.2 gms p.u of output

Standard price p.u of material consumed (SP)= $2.95 per gram

The actual quantity of material consumed(AQ)=46000 grams

Actual price p.u of material consumed(AP)= $ 3.05 per gram

Purchase Quantity (PQ)=46000 grams

Standard Hours (SH)=Expected time for Actual output=1.25 hours p.u

Actual Rate per hour (AR)=$ 9 ph

Actual hours paid for (AH)=16875 hours

Standard rate ph (SR)=$10 ph

a Direct material Activity variance=SQXSP-BQXSP

= (11250X4.2X2.95)-(10800X4.2X2.95)

= $5575.5

b Direct Material Spending Variance=AQXAP-AQXSP

= (46000 X 3.05)-(46000 X 2.95)

= 140300-135700

= $ 4600

c Direct Material Price Variance=AQXSP-AQXAP

= (46000 X 2.95)-(46000 X 3.05)

= 135700 -140300

= $ 4600

d Direct Material Quantity Variance=SQXSP-AQXSP

= (11250 X4.2 X2.95)-(46000 X 2.95)

=139387.5-135700

= $3687.5