The Winners’ Products Company recognizes variances from standards at the earlies

Question

The Winners’ Products Company recognizes variances from standards at the earliest opportunity, and the quantity of direct materials purchased is equal to the quantity used. The following information is available for the most recent month:

c)      Flexible Budget Variances.

Please

Direct materials Direct Labor Standard quantity/unit 12.00 lbs. 4.0 hrs. Standard price/lb. or hr. $4.10/lb. $18.00/hr. Actual quantity/unit 12.50 lbs. 3.8 hrs. Actual price/lb. or hr. $4.00/lb. $17.50/hr. Static budget volume 800 units Actual volume 900 units Actual overhead $11,000 Standard variable overhead $5/unit Standard fixed overhead $5,600

Explanation / Answer

Part A)

The direct material variances can be calculated with the use of following formula:

Direct Material Price Variance = Actual Quantity*(Actual Rate - Standard Rate)

Direct Material Efficiency Variance = Standard Rate*(Actual Material Used - Standard Material Used for Actual Production)

Flexible Budget Variance = Direct Material Price Variance + Direct Material Efficiency Variance

____________

Using the values provided in the question, we get,

Direct Material Price Variance = 900*12.50*(4 - 4.10) = $1,125 (F)

Direct Material Efficiency Variance = 4.10*(900*12.50 - 900*12) = $1,845 (U)

Flexible Budget Variance = 1,125 + (1,845) = 720 (U)

____________

Part B)

The direct labor variances can be calculated with the use of following formula:

Direct Labor Price Variance = Actual Hours*(Actual Rate - Standard Rate)

Direct Labor Efficiency Variance = Standard Rate*(Actual Hours Used - Standard Hours Used for Actual Production)

Flexible Budget Variance = Direct Labor Price Variance + Direct Labor Efficiency Variance

____________

Using the values provided in the question, we get,

Direct Labor Price Variance = 900*3.80*(17.50 - 18) = $1,710 (F)

Direct Labor Efficiency Variance = 18*(900*3.80 - 900*4) = $3,240 (F)

Flexible Budget Variance = 1,710 + 3,240 = $4,950

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.