Spam Inc. had the following standard costs and plans for fiscal current year for

Question

Spam Inc. had the following standard costs and plans for fiscal current year for the production'
of custom meat products
Plan 500,000 Plan
Direct Material .5 lbs meat per unit at $1.20 per lb
Direct Labor .6 hrs. at $12 per hour
Overhead $3.50 per unit variable ovhd
$600,000 fixed ovhd

Actual
490,000 units
235,200.00 lbs $272,832.00
308,700.00 hrs $3,627,225.00
$1,690,500.00 variable ovhd
$612,000.00 fixed ovhd

Calculate price and efficiency variances for all of the above and briefly explain what they mean
and why the variances may have occurred

Explanation / Answer

Direct Material

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

Direct Material Price Variance = (1.20*235200 - 272832)

Direct Material Price Variance = $ 9408 Favorable

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

Direct Material Quantity Variance = (1.20*245000 - 1.20*235200)

Direct Material Quantity Variance = $ 11760 Favorable

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

Direct Material Cost Variance = (1.20*245000 - 272832)

Direct Material Cost Variance = $ 21168 Favorable

Direct Labor

Direct Labor Rate Variance = (Standard Rate* Actual Hour- Actual Rate* Actual Hour)

Direct Labor Rate Variance = (12*308700 - 3627225)

Direct Labor Rate Variance = $ 77,175 Favorable

Direct Labor Effieciency Variance = (Standard Rate* Standard Hour- Standard Rate* Actual Hour)

Direct Labor Effieciency Variance = (12*294000 - 12*308700)

Direct Labor Effieciency Variance = $ 176400 Unfavorable

Direct Labor Cost Variance = (Standard Rate* Standard Hour- Actual Rate* Actual Hour)

Direct Labor Cost Variance = (12*294000 - 3627225)

Direct Labor Cost Variance = $ 99,225 Unfavorable

Variable Overhead

Variable Overhead Rate Variance = (Standard Rate* Actual Quantity- Actual Rate* Actual Quantity)

Variable Overhead Rate Variance = (3.50*490000 - 1690500)

Variable Overhead Rate Variance = $ 24,500 Favorable

Variable Overhead Effieciency Variance = (Standard Rate* Standard Quantity- Standard Rate* Actual Quantity)

Variable Overhead Effieciency Variance = 0

Variable Overhead Cost Variance = (Standard Rate* Standard Quantity- Actual Rate* Actual Quantity)

Variable Overhead Cost Variance = (3.50*490000 - 1690500)

Variable Overhead Cost Variance = $ 24,500 Favorable

Fixed Overhead

Fixed Overhead Price Variance = Budgeted Overhead - Actual overhead

Fixed Overhead Price Variance = 600000-612000

Fixed Overhead Price Variance = $ 12000 Unfavorable

Fixed Overhead Effieciency Variance = (Standard Rate* Standard Quantity- Budgeted Overhead)

Fixed Overhead Effieciency Variance = (1.2*490000 - 600000)

Fixed Overhead Effieciency Variance = $ 12000 Unfavorable

Fixed Overhead Cost Variance = (Standard Rate* Standard Quantity- Actual Rate* Actual Quantity)

Fixed Overhead Cost Variance = (1.2*490000 - 612000)

Fixed Overhead Cost Variance = $ 24,000 Unfavorable

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