Explain results The standards for one case of Springfever Tonic are: Direct mate

Question

Explain results The standards for one case of Springfever Tonic are:

Direct materials . . . . . . . . . . . . . . . . . . 8 lbs. @ $3.00/lb. = $24
Direct labor . . . . . . . . . . . . . . . . . . . . . 6 hrs. @ $1 0.00/hr. = 60
Variable overhead (based
on direct labor hours) . . . . . . . . . . . . 6 hrs. @ $5.00/hr. = 30

During the week ended April 27, the following activity took place:

14,800 lbs. of raw materials were purchased for inventory at a cost of $2.97 per pound.
2,000 cases of ?nished product were produced.
16,600 lbs. of raw materials were used.
11,600 direct labor hours were worked at a total cost of $121,800.
$60,900 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 ef?ciency variance.
e. Variable overhead spending variance.
f. Variable overhead ef?ciency variance.

Explanation / Answer

   Raw materials purchase price variance =    (Standard price - Actual price) * Actual quantity purchased

====================

b. Raw materials usage variance.

(Standard usage - Actual usage) * Standard price

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c. Direct labor rate variance.

(Standard rate - Actual rate) * Actual hours

=============
d. Direct labor efciency variance.

(Standard hours - Actual hours) * Standard rate

==============
e. Variable overhead spending variance.

(Standard rate - Actual rate) * Actual hours

============
f. Variable overhead efciency variance.

(Standard hours - Actual hours) * Standard rate

   Raw materials purchase price variance =    (Standard price - Actual price) * Actual quantity purchased

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