Budgeted Information Direct Materials: Pewter - 1 pound per unit @ $3.00 per pou

Question

Budgeted Information

Direct Materials:

    Pewter - 1 pound per unit @ $3.00 per pound

    Paint - 2 ounces per unit @ $.75 per ounce

Direct Labor:

    1 hour per unit at @ $9.00 per hour

Other:

    Budgeted Sales Price - $21.00 per unit

    Budgeted units - 100,000

    Budgeted Factory Overhead - $200,000

Actual Results

Direct Materials:

    Pewter - .9 pounds per unit @ $3.25 per pound

    Paint - 2.2 ounces per unit @ $.70 per ounce

Direct Labor:

    1.1 hours per unit at @ $10.00 per hour

Other:

    Actual Sales Price - $19.00 per unit

    Actual units - 95,000

    Actual Factory Overhead - $190,000

Create a 5-column Variance Analysis that identifies all major variances.

Budgeted Information

Direct Materials:

    Pewter - 1 pound per unit @ $3.00 per pound

    Paint - 2 ounces per unit @ $.75 per ounce

Direct Labor:

    1 hour per unit at @ $9.00 per hour

Other:

    Budgeted Sales Price - $21.00 per unit

    Budgeted units - 100,000

    Budgeted Factory Overhead - $200,000

Actual Results

Direct Materials:

    Pewter - .9 pounds per unit @ $3.25 per pound

    Paint - 2.2 ounces per unit @ $.70 per ounce

Direct Labor:

    1.1 hours per unit at @ $10.00 per hour

Other:

    Actual Sales Price - $19.00 per unit

    Actual units - 95,000

    Actual Factory Overhead - $190,000

Create a 5-column Variance Analysis that identifies all major variances.

Explanation / Answer

Solution:

(A) Direct Matrial Variances :

(1) Material Cost Variance : (SQ*SP)-(AQ*AP)

Pewter = (100000*3)-(95000*2.925) =22125 F (AP= 3.25*0.9 = 2.925)

Paint = (100000*1.5)-(95000*1.54) = 3700F (AP= 2.2*0.7 = 1.54)

=22125 F + 3700F = 25825 F (F Stands for Favourable and A stands for Adverse)

(2) Material Price Variance = (SP-AP)*AQ

Pewter = (3-2.925)*95000 = 7125F

Paint = (1.5-1.54)*95000 = 3800A

= 7125F +3800A = 3325F

(3) Metrial Usage Variance = (SQ-AQ)*SP

Pewter = (100000-95000)*3 = 15000F

Paint = (100000-95000)*1.5 = 7500F

= 15000F + 7500F = 22500F

(4) Material Mix Variance = (SQ-AQ) SP

Pewter = (100000-95000)3 = 15000

Paint = (100000-95000)*1.5 = 7500F

= 15000F + 7500F = 22500F

(B) Labour Variances

(1) Labour Cost Variance : (SQ*SP per hour)-(AQ*AP per hour)

= (100000*9)-(95000*11) = 145000 A

(2) Labour Rate Variance = (SP-AP)*AQ

= (9-11)*95000 = 190000 A

(3) Labour Efficiency Variance = (SQ-AQ)*SP

= (100000-95000)*9 = 45000F

(C) Overhead Variance

(1) Overhead Cost Variance = (Standard Hours for Actual Output * SP) - (Actual Hours* Actual Rate)

= (95000*1)-(95000*1.1) = 9500

(D)Sales Variance

(1) Sales Value Variance : (AQ*AP)-(SQ*SP)

= (95000*19)-(100000*21) = 295000 F

(2) Sales Price Variance = (AP-SP)*Actual Sales Quantity

= (19-21)*95000 = 190000 F

(3) Sales Volume Variance = (AQ-SQ)*standard Price

= (95000-100000)*21 = 105000F

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