Lido Company\'s standards for the most recent period are given below on the Stan
ID: 2477030 • Letter: L
Question
Lido Company's standards for the most recent period are given below on the Standard Cost Card. Fixed and variable manufacturing overhead costs are applied to products on the basis of machine hours. The denominator volume of machine hours is 5,000.
Standard Standard Standard Cost
Quantity or Hours Price or Rate per unit of
per unit of output per unit of input output
Direct Materials 3 feet $5.60 per foot $16.80
Direct Labor 4.2 direct labor hours $10.00 per direct labor hour $42.00
Variable Overhead 5 machine hours $13.00 per machine hour $65.00
Fixed Overhead 5 machine hours $16.00 per machine hour $80.00
Actual costs for the most recent period and the actual number of machine hours used, during which 800 units of output were actually produced, are given below:
Materials: The firm purchased 2,800 feet at $5.00 per foot, but only used 2,250 feet in production.
Direct Labor: The firm used 2,500 direct labor hours and paid $10.40 per direct labor hour.
Fixed Overhead: Actual fixed overhead costs were $91,200.
Machine Hours: The firm used 4,700 machine hours.
Show your calculations.
(a) What is the dollar amount of the material price variance? (Indicate whether the variance is favorable (F) or unfavorable (U).)
(b) What is the dollar amount of the direct labor rate variance? (Indicate whether the variance is favorable (F) or unfavorable (U).)
(c) What is the dollar amount of the fixed overhead budget variance? (Indicate whether the variance is favorable (F) or unfavorable (U).)
Explanation / Answer
Answer:(a) material price variance=(SP-AP)*SQ
=($5.6-$5)*2800 feet
=$1680 F
Answer:(b) direct labor rate variance=(SR-AR)*AH
=($10-$10.40)*2500
=$1000 U
Answer:(c) fixed overhead budget variance=Budgeted Fixed overhead-Actual fixed overhead
=80000-91200
11200 U
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