The following data reflect the current month\'s activity for Vickers Corporation

Question

The following data reflect the current month's activity for Vickers Corporation: Actual total direct labor Actual hours worked Standard labor-hours allowed for actual output (flexible budget) Direct labor price variance Actual variable overhead Standard variable overhead rate per standard direct labor- hour $689 310 37,000 35,900 13.690 F $157,800 430 Variable overhead is applied based on standard direct labor-hours allowed. Required: Compute the labor and variable overhead price and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) Direct labor Price variance Efficiency variance Variable overhead: Price variance Efficiency variance

Explanation / Answer

Direct Labour Variance

Direct labour Price variance

this is the difference between the standard cost for actual production and the actual cost in production.

Here Direct Labour Price Variance is given 13,690F. Have to work back to get Standard Rate per Hour

- Favourable Variance means Actual Cost of Labour (A.Hour*A.rate) is lesser than Standard. So,

We have Actual labour cost=689,310

plus:Price Variance............=13,690 F

Standard Rate* Actual Hours =703,000

Direct Labour Efficency Variane

This is the difference between the standard cost of actual direct labor hours utilized during a period and the standard hours of direct labor for the level of output achieved.

**Standard Hours Worked for actual prduction is, if the Work progressed as per budget then the standard time spend for this level of production(actual units).

=703.000-682,100 =20,900 A

Adverse Variance becuase it took more time than expected to complete,ie

Actual Hours*S.R >Std Hour*S.R(Adverse Variance)

Total Labour Variance =(-20,900)A +13,690 F =(7210) A

Variable Overhead Variance

Variable Overhead Price Variance

The difference between the variable overhead actually incurred and the variable overhead which should have been incurred for the actual hours(std rate*AH).

Favourable Variance because allocated lesser Than expected. per hour =157,800/37,000 =$4.26(lesser)

Variable Overhead Efficency Variance

This is the difference between the actual and budgeted hours worked and which are then applied to the standard variable overhead rate per hour.

Adverse Variance since AH*SR > SH*SR . Actual Hour Worked Is higher than expected.

Total Variable OH variance =1300F +(-4730A) =(3430A)

Table1 Actual Hours * 689,310 (given) Actual Rate 13,690 F (given) Actual Hours 37,000 *(Ah*SR) 703,000(Above) Standard Rate(703,000/3700) 19

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.