Sage Corporation makes a product with the following standard costs: Input Standa
ID: 2480982 • Letter: S
Question
Sage Corporation makes a product with the following standard costs:
Input
Standard Quantity or Hours
Standard Price or Rate
Standard Cost Per Unit
Direct materials
9.5 grams
$6.00 per gram
$57.00
Direct labor
0.5 hours
$23.00 per hour
$11.50
Variable overhead
0.5 hours
$2.00 per hour
$1.00
In November the company's budgeted production was 3,000 units but the actual production and sales was 2,800 units. The company used 27,670 grams of the direct material and 1,390 direct labor-hours to produce this output. During the month, the company purchased 31,400 grams of the direct material at a cost of $198,920. The actual direct labor cost was $29,607 and the actual variable overhead cost was $2,502.
The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
Required: Calculate the following variances for November:
a. material price variance
b. material quantity variance
c. direct labor variance
d. direct labor efficiency variance
e. variable overhead efficiency variance
Input
Standard Quantity or Hours
Standard Price or Rate
Standard Cost Per Unit
Direct materials
9.5 grams
$6.00 per gram
$57.00
Direct labor
0.5 hours
$23.00 per hour
$11.50
Variable overhead
0.5 hours
$2.00 per hour
$1.00
Explanation / Answer
Standard price per per gram= $6.00
Standard Qty for Actual Production= 9.5 x 2,800=26,600 grams
Actual Qty used= 27,670
Actual cost of Material used = $198,920/31,400 x 27,670=$175,290
a.
Direct Material Price Variance:
= Actual Cost - Standard Cost of Actual Quantity
= Actual Quantity x Actual Price- Actual Quantity x Standard Price
= $175,290-(27,670 x $6)
=$175,290-166,020
b. =$9,270 F
Direct Material Qty Variance:
= Standard Quantity x Standard Price - Actual Quantity x Standard Price
=26,600 x 6 – 27,670 x 6
=159,600-166,020
=$6,420 U
Standard rate per labor hr= $23.00
Standard rate for Actual hrs worked= 0.5 x 2,800=1,400 hrs
Actual hrs worked= 1,390 hrs
Actual cost of labor worked = $29,607
C. direct labor variance
=Standard hrs x Standard Rate – Actual hrs x Actual rate
=1,400 x 23.00 - $29,607
=32,200-29,607
=$2,593 F
d. direct labor efficiency variance
= Standard hrs x standard rate per hr- Actual hrs x standard rate
=1,400 x 23.00 – 1,390 x 23.00
=32,200-31,970
=$230 F
e. variable overhead efficiency variance
= Standard hrs x standard rate per hr- Actual hrs x standard rate
=1,400 x 2 – 1,390- 2
= 2,800-2,780
=$20 F
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