Does this look correct? Silmon Corporation makes a product with the following st

Question

Does this look correct?

Silmon Corporation makes a product with the following standard costs: In June the company produced 4,700 units using 20,990 grams of the direct material and 2,510 direct labor-hours. During the month the company purchased 24,600 grams of the direct material at a price of $4.80 per gram. The actual direct labor rate was $12.60 per hour and the actual variable overhead rate was S1.90 per hour. The materials price variance is computed when materials are purchased. Variable overhead is applied on the basis of direct labor-hours. Required: Compute the following variances for raw materials, direct labor, and variable overhead, assuming that the price variance for materials is recognized at point of purchase: (Input all amounts as positive values. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "UM for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.) Direct materials quantity variance $ Direct materials price variance $ Direct labor efficiency variance $ Direct labor rate variance $ Variable overhead efficiency variance Variable overhead rate variance $

Explanation / Answer

A)

Materials quantity variance = (AQ SQ) SP

AQ= 20,990

SQ = 4,700*4.2 = 19740

SP = $5

Materials quantity variance = (20,990 - 19,740 ) * $5 = $6250 U

B)

Materials price variance = AQ (AP SP)

AQ = 24,600

AP = $4.80

SP = $5

Materials price variance = 24,600($4.80 - $5) = 44,920 F

c)

Labor efficiency variance = (AH SH) SR

AH = 2,510

SH = 4700 * 0.5 = 2350

SR = $12

Labor efficiency variance = (2510 -2350 ) * $12 = $1,920 U

D)

Labor rate variance = AH(AR SR)

AH = 2510

AR = $12.60

SR = $12

Labor rate variance = 2,510 ($12.60-$12) = $1,506 U

E)

Variable overhead efficiency variance = Standard overhead rate * (Actual hours - standard hours)

Standard overhead rate = $2

Actual hours = 2,510

standard hours = 2,350

Variable overhead efficiency variance = $2 (2510 - 2350) = $320 U

F)

Variable overhead rate variance = AH(AR SR)

AH = 2,510

AR = $1.90

SR = $2

Variable overhead rate variance =2510 ($1.90 - $2) = $251 F

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