A.) Compute all of the materials and labor variances. (Round answers to 0 decima

Question

A.) Compute all of the materials and labor variances. (Round answers to 0 decimal places, e.g. 125.)

B.) Compute the total overhead variance.

Costello Corporation manufactures a single product. The standard cost per unit of product is shown below.
Direct materials—1 pound plastic at $7.58 per pound $ 7.58 Direct labor—2.00 hours at $12.00 per hour 24.00 Variable manufacturing overhead 16.00 Fixed manufacturing overhead 12.00 Total standard cost per unit $59.58
The predetermined manufacturing overhead rate is $14 per direct labor hour ($28.00 ÷ 2.00). It was computed from a master manufacturing overhead budget based on normal production of 11,000 direct labor hours (5,500 units) for the month. The master budget showed total variable costs of $88,000 ($8.00 per hour) and total fixed overhead costs of $66,000 ($6.00 per hour). Actual costs for October in producing 4,500 units were as follows.
Direct materials (4,680 pounds) $ 36,504 Direct labor (8,840 hours) 109,616 Variable overhead 93,868 Fixed overhead 34,132     Total manufacturing costs $274,120
The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.

Explanation / Answer

Answer: A)

Total material variance= (AQ*AP)-(SQ*SP)

AP = 36504/4680 = $7.8

Total material variance=(4680*$7.8) - (4500*$7.58) = 36504-34110 = $2394 F

Material Price variance = (AQ*AP)-(AQ*SP)

Material Price variance =(4680*$7.8) - (4680*$7.58) = 36504 - 35474 = $1030 U

Material quantity variance = (AQ*SP)-(SQ*SP)

Material quantity variance =(4680*$7.58) - (4500*$7.58) = 35474 - 34110 = $1364 U

Total labor variance = (AH*AR)-(SH*SR)

AR = 109,616/8840 = $12.4

SH = 4500*2 = 9000

Total labor variance = (8840*$12.4)-(9000*$12) = 109616 - 108000 = $1616 U

Labour price variance = (AH*AR)-(AH*SR)

Labour price variance =(8840*$12.4)- (8840*12) = 109616 - 106080 = $3536 U

Labour quantity variance = (AH*SR)-(SH*SR)

Labour quantity variance =(8840*$12)-(9000*$12) = 106080 - 108000 = $1920 F

Answer: B)

Total overhead variance = Actual overhead - Overhead applied

Total overhead variance =(93,868+34,132) - (4500*14) = 128000 - 63000 = $65000 U

(Note: $14 = $8 variable + $6 Fixed)

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