The following information is for the standard and actual costs for the Happy Cor
ID: 2377891 • Letter: T
Question
The following information is for the standard and actual costs for the Happy Corporation.
Standard Costs:
Budgeted units of production - 16,000 (80% of capacity)
Standard labor hours per unit - 4
Standard labor rate $26 per hour
Standard material per unit - 8 lbs.
Standard material cost - $ 12 per lb.
Budgeted fixed overhead $640,000
Standard variable overhead rate - $15 per labor hour.
Fixed overhead rate is based on budgeted labor hours at 80% capacity.
Actual Cost:
Actual production - 16,500 units
Actual fixed overhead - $640,000
Actual variable overhead - $1,000,000
Actual labor - 65,000 hours, total labor costs $1,700,000
Actual material purchased and used - 130,000 lbs, total material cost $1,600,000
Actual variable overhead - $1,000,000
1. Determine the Quantity Variance
a. 24,000 unfavorable
b. 24,000 favorable
c. 12,000 unfavorable
d. 12,000 favorable
2. Determine the total direct materials cost variance
a $64,000
b. $24,000
c. $40,000
d. $16,000
3. Determine the Time Variance
a. $1,690,000
b. 26,000
c. 1,716,000
d. 3,407.000
4. Determine the Total Labor Cost Variance
a. 26,000
b. 10,000
c. 36,000
d. 16,000
5. Determine the total Factory Overhead Cost Variance
a. 20,000
b. 10,000
c. 30,000
d. 40,000
Explanation / Answer
1. Determine the Quantity Variance
Materials quantity variance MQV = Standard Price*(Standard Quantity-Actual Quantity)
ie MQV = 12*(16000*8-130000) = -$24,000 = 24000U
a. 24,000 unfavorable
2. Determine the total direct materials cost variance
Materials price variance MPV = Actual Quantity Used*(Standard Price - Actual Price)
ie MPV = 130000*12 - 1600000 = -$40,000 = 40000U
c. $40,000
3. Determine the Time Variance
Labor efficiency variance LEV = Standard Lab Rate*(Standard Hours-Actual Hours)
ie LEV =26*(16000*4 - 65000) = -$26,000 = 26000U
b. 26,000
4. Determine the Total Labor Cost Variance
Labor rate variance LRV = Actual Hours*(Standard Rate-Actual Rate)
ie LRV= AH*SR - AH*AR = 65000*26 - 1700000 = -$10,000 = 10000U
b. 10,000
5. Determine the total Factory Overhead Cost Variance
OHRV = overhead rate variance = AOH-SOH = 1700000 - 65000*26
= Actual Hours x ( Actual rate - Standard rate)
= $10,000
b. 10,000
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