ACTUAL for the current year: Purchase of raw materials (8,000 sq ft at $13.50) $

Question

ACTUAL for the current year:

Purchase of raw materials (8,000 sq ft at $13.50)

$108,000

Raw materials used

7,700 yards

Direct Labor costs (19,200 at $25.00)

Actual variable overhead cost                       $366,300

$480,000

Units produced

6750 units

Standards per unit of product:

Raw materials

1.2 yards at $13.00/sq ft

Direct labor

variable overhead        18.50 per direct labor hour

2.8 hours at $25.10/hr

Compute the following variances:

material variance (price and quantity)

labor variance (rate and efficiency)

Purchase of raw materials (8,000 sq ft at $13.50)

$108,000

Raw materials used

7,700 yards

Direct Labor costs (19,200 at $25.00)

Actual variable overhead cost                       $366,300

$480,000

Units produced

6750 units

Standards per unit of product:

Raw materials

1.2 yards at $13.00/sq ft

Direct labor

variable overhead        18.50 per direct labor hour

2.8 hours at $25.10/hr

Explanation / Answer

Materials price variance = 8000*(13.50-13)= $4000 Unfavorable Materials quantity variance=13*(7700-6750*1.2)= $5200 Favorable Labor rate variance = 19200*(25-25.1) = $1920 Favorable Labor efficiency variance=25.1*(19200-6750*2.8)= $7530 Unfavorable

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