Anton Company manufactures wooden magazine stands. An accountant for Anton just

Question

Anton Company manufactures wooden magazine stands. An accountant for Anton just completed the variance report for the current month. After printing the report, his computer’s hard drive crashed, effectively destroying most of the actual results for the month. All that the accountant remembers is that actual production was 220 stands and that all materials purchased were used in production. The following information is also available.

Required:

Using the budget for the current month and the variance report, construct the following items.

a. What was the actual purchase price per square foot of wood? (Round your answer to 2 decimal places.)

b. How many labor hours did it actually take to produce each stand? (Round your answer to 2 decimal places.)

c. What was the actual wage rate paid per hour? (Round your answer to 2 decimal places.)

d. What was actual total overhead for the month?

Current Month: Budgeted Amounts Budgeted production: 200 magazine stands Direct materials: Wood Usage 3 square feet per stand Price $ 0.25 per square foot Direct labor: Usage 0.5 hours per stand Rate $ 10 per hour Variable overhead (allocated based on direct labor hours): Rate per labor hour $ 4 Rate per stand $ 2 Fixed overhead (allocated based on direct labor hours): Rate per labor hour $ 6 Rate per stand $ 3 Current Month: Variances Direct materials price variance $ 33 Unfavorable Direct materials quantity variance -0- Direct labor rate variance $ 231 Favorable Direct labor efficiency variance $ 550 Unfavorable Overhead volume variance $ 60 Favorable Overhead spending variance $ 210 Unfavorable

Explanation / Answer

Material Price Variance = Actual Quantity x (Actual Price – Standard Price)

33 = 660* x (Actual Price – 0.25)

(Actual Price – 0.25) = 33/660 = 0.05

Actual Price = 0.05+0.25 = $0.30 per SQF

*Actual quantity is same as standard quantity since quantity variance is 0(220 stands x 3SQF = 660SQF)

Direct labor efficiency variance = (Actual hours – standard hours) x Standard Rate

550 = (Actual Hours – 110) x 10

(Actual Hours – 110) = 550/10 = 55

Actual Hours = 55+110 = 165 hours

*Standard hours = 220 x 0.5 hours per stand = 110 hours

Direct Labor rate variance = Actual hours x (Standard Rate – Actual Rate)

231 = 165 x (10 – Actual rate)

(10 – Actual rate) = 231/165 = 1.4

Actual rate = 10-1.4 = $8.6 per hour

Overhead spending variance = Actual overhead – Budgeted Overhead

210 = Actual Overhead – (6 x 200 x 0.5)

Actual Overhead = 210+600 = 810

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