PROBLEMS-SET B LO3, 4, 5 P10-1B. Caleulate Variances The following summary data

Question

PROBLEMS-SET B LO3, 4, 5 P10-1B. Caleulate Variances The following summary data relate to the operations of Randolph Company for July, during which 4,500 finished units were produced: Standard Total Total Unit Costs Costs Direct material: $5.40 $ 28.200 Direct labor: 10.24 47,500 Variable overhead: 6.00 Actual . .. Total 30,100 $105,800 $21.64 Required Determine the following variances and indicate whether each is favorable or unfavorable: a. Materials price variance and efficiency variance b. Labor rate variance and efficiency variance c. Variable overhead spending variance and efficiency variance

Explanation / Answer

Answer a.

Materials Price Variance:

Actual Materials Cost = $28,200
Actual Quantity = 3,000 lbs
Standard Materials Rate = $9.00 per lb

Materials Price Variance = Actual Materials Cost - Actual Quantity * Standard Materials Rate
Materials Price Variance = $28,200 - 3,000 * $9.00
Materials Price Variance = $1,200 Unfavorable

Materials Efficiency Variance:

Standard Quantity = Standard Quantity per unit * Actual units
Standard Quantity = 0.60 lb * 4,500
Standard Quantity = 2,700 lbs

Standard Materials Rate = $9.00 per lb
Actual Quantity = 3,000 lbs

Materials Efficiency Variance = Standard Materials Rate * (Actual Quantity - Standard Quantity)
Materials Efficiency Variance = $9.00 * (3,000 - 2,700)
Materials Efficiency Variance = $2,700 Unfavorable

Answer b.

Labor Rate Variance:

Actual Labor Cost = $47,500
Actual hours = 3,800 hours
Standard Labor Rate = $12.80 per hour

Labor Rate Variance = Actual Labor Cost - Actual hours * Standard Labor Rate
Labor Rate Variance = $47,500 - 3,800 * $12.80
Labor Rate Variance = $1,140 Favorable

Labor Efficiency Variance:

Standard hours = Standard hours per unit * Actual units
Standard hours = 0.80 hour * 4,500
Standard hours = 3,600

Standard Labor Rate = $12.80 per hour
Actual hours = 3,800

Labor Efficiency Variance = Standard Labor Rate * (Actual hours - Standard hours)
Labor Efficiency Variance = $12.80 * (3,800 - 3,600)
Labor Efficiency Variance = $2,560 Unfavorable

Answer c.

Variable Overhead Spending Variance:

Actual Variable Overhead Cost = $30,100
Actual hours = 3,800 hours
Standard Variable Overhead Rate = $7.50 per hour

Variable Overhead Spending Variance = Actual Variable Overhead Cost - Actual hours * Standard Variable Overhead Rate
Variable Overhead Spending Variance = $30,100 - 3,800 * $7.50
Variable Overhead Spending Variance = $1,600 Unfavorable

Variable Overhead Efficiency Variance:

Standard hours = Standard hours per unit * Actual units
Standard hours = 0.80 hour * 4,500
Standard hours = 3,600

Standard Variable Overhead Rate = $7.50 per hour
Actual hours = 3,800

Variable Overhead Efficiency Variance = Standard Variable Overhead Rate * (Actual hours - Standard hours)
Variable Overhead Efficiency Variance = $7.50 * (3,800 - 3,600)
Variable Overhead Efficiency Variance = $1,500 Unfavorable

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