The standard cost sheet for Chambers Company, which manufactures one product, fo

Question

The standard cost sheet for Chambers Company, which manufactures one product, follows: Direct materials, 40 yards at $3.00 per yard $ 120 Direct labor, 4 hours at $20 per hour 80 Factory overhead applied at 80% of direct labor 64 (variable costs = $50; fixed costs = $14) Variable selling and administrative 69 Fixed selling and administrative 45 Total unit costs $ 378 Standards have been computed based on a master budget activity level of 29,300 direct labor-hours per month. Actual activity for the past month was as follows: Materials used 201,000 yards at $3.05 per yard Direct labor 21,000 hours at $22.00 per hour Total factory overhead $ 430,000 Production 4,800 units Required: Prepare variance analyses for the variable and fixed costs. Materials are purchased as they are used. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Explanation / Answer

Material variance

1) material cost variance

Standard qty × standard price -actual qty × actual price

192000×3- 201000× 3.05 = 37050 (A)

2) material price variance

(Standard price - actual price )× actual qty

(3-3.05)× 201000

10050(A)

3) Material usage variance

(Standard qty - actual qty )× standard price

(192000- 201000)×3 = 27000(A)

Labour variance

1) labour cost variance

Standard hour × standard rate - actual hour × actual rate

29300× 20-21000×22 = 124000 (f)

2)Labour rate variance

(20-22)×29300=58600 (A)

3) labour efficiency variance

(21000- 29300)× 20 = 166000(A)

Variable overhead variance

1) Variable overhead expenditure variance

Standard output × standard rate - actual output × actual rate

468800-430000= 38800(f)

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