Lime Corporation makes a product with the following standard costs: Input Standa
ID: 2529819 • Letter: L
Question
Lime 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 rate variance
d. Direct Labor efficieny
e. Variable overhead efficieny 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
a) Materials price variance (Actual rate - standard price)*AQ purchased (198,920 - 31400*6) 10520 U b) Material quantity variance (Actual qty used - standard Qty allowed)*Standard rate (27,670 - 2800*9.5)*6 6420 U c) Direct labor rate variance (Actual rate - standard rate)*Actual hours (29,607 - 23*1390) 2,363 F d) direct labor efficiency variance (Actual hours - standard hours)*standard rate (1,390 - 2800*.5)*23 230 F e) Variable overhead efficiency variance (Actual hours - standard hours)*standard rate (1390 -1400)*2 20 F
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