Ayala Corporation accumulates the following data relative to jobs started and fi
ID: 2459305 • Letter: A
Question
Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2014. Overhead is applied on the basis of standard machine hours. 3.20 hours of machine time are required for each direct labor hour. The jobs were sold for 5489,000. Selling and administrative expenses were 538,800. Assume that the amount of raw materials purchased equaled the amount used. (a) &(b) Compute all of the variances for (1) direct materials and (2) direct labor. (Round answers to 0 decimal places, e.g. 125.) Compute the total overhead variance.Explanation / Answer
Total Material Variance = ( SP*SQ) - (AP*AQ) = (1.84*10550) - ( 2*11200) =2988(A)
Material Price Variance = (SP-AP)*AQ=(1.84-2)*11200 = 1792(A)
Materail Quantity Variance = (SP*SQ) - (SP*AQ) = (1.84*10550) - ( 1.84*11200) = 1196(A)
Where
SQ= Standard Quantity = Expected Consumption for Actual Quantity
AQ= Actual Quantity of material consumed
SP= Standard Price per unit of material
AP =Actual Price per unit of material
Total Labour Variance = (SR*SH) - (AR*AH)= (10.71* 15200) - (11.4*14900) = 7068 (A)
Labour Price Variance = ( SR*AH) - (AR*AH) =( 10.71*14900) - (11.4*14900) = 10281(A)
Labour Quantity Variance = (SR*SH) - (SR*AH)=( 10.71*15200) - (10.71*14900) = 3213(F)
Note :
Actual rate per hour (AR) = Actual direct labour cost / Actual labour hours =169860/14900=11.40
Standard rate per hour (SR)= Standard direct labour cost / Standard labour hour =162792/15200 = 10.71
Where ,
SR = Standard rate per hour
AH = Actual rate per hour
SH = Standard hour = Expected time for actual output
AH = Actual hour worked
Total Overhead variance = Manufacturing overhead applied (SR*SH) - Manufacturing overhead incurred(AR*AH)
= ( 228608 -224988) = 3620 (F)
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