Kropf Inc. has provided the following data concerning one of the products in its
ID: 2520030 • Letter: K
Question
Kropf Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.
Inputs
Standard Quantity or Hours per Unit of Output
Standard Price or Rate
Direct materials
7.4
liters
$
7.00
per liter
Direct labor
0.70
hours
$
21.70
per hour
Variable manufacturing overhead
0.70
hours
$
5.90
per hour
The company has reported the following actual results for the product for September:
Actual output
9,600
units
Raw materials purchased
75,000
liters
Actual cost of raw materials purchased
562,500
Raw materials used in production
71,050
liters
Actual direct labor-hours
6,410
hours
Actual direct labor cost
$
142,302
Actual variable overhead cost
$
34,614
Required:
a. Compute the materials price variance for September.
b. Compute the materials quantity variance for September.
c. Compute the labor rate variance for September.
d. Compute the labor efficiency variance for September.
e. Compute the variable overhead rate variance for September.
f. Compute the variable overhead efficiency variance for September
Inputs
Standard Quantity or Hours per Unit of Output
Standard Price or Rate
Direct materials
7.4
liters
$
7.00
per liter
Direct labor
0.70
hours
$
21.70
per hour
Variable manufacturing overhead
0.70
hours
$
5.90
per hour
Explanation / Answer
a. Materials price variance = (Standard price - actual price) x Material purchased
= {$7 - ($562,500 / 75,000)} x 75,000 = $37,500 Unfavorable
b. Materials quantity variance = (Standard quantity - actual quantity used) x standard price
= {(9,600 x 7.4) - 71,050} x $7 = $70 Unfavorable
c. Labor rate variance = (Standard rate - actual rate) x Actual hours used
= {$21.70 - ($142,302 / 6,410) x 6,410 = $3,205 Unfavorable
d. Labor efficiency variance = (Standard hours - actual hours) x Standard rate
= {(9,600 x 0.70) - 6,410} x $21.70 = $6,727 Favorable
e. Variable overhead rate variance = (Standard rate - actual rate) x Actual hours used
= {$5.90 - ($34,614 / 6,410) x 6,410 = $3,305 Favorable
f. Variable overhead efficiency variance = (Standard hours - actual hours) x Standard rate
= {(9,600 x 0.70) - 6,410} x $5.90 = $1,829 Favorable
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