Problem 21-4B Computation of materials, labor, and overhead variances P2 P3 Kryl
ID: 2564225 • Letter: P
Question
Problem 21-4B Computation of materials, labor, and overhead variances P2 P3 Kryll Company set the following standard unit costs for its single product. Direct materials (25 lbs.@$4 per lb.). . . .$100 48 Factory overhead-variable (6 hrs.@ $5 per hr) Factory overhead -fixed (6 hrs. @$7 per hr) 30 42 $220 The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 60,000 units per quarter. The following flexible budget information is available. Operating Levels 70% 80% 90% Production in units 42.000 48,000 Standard direct labor hours Budgeted overhead 54,000 252000 288.000 324.000 Fxed factory overhead...$2.016.000 $2.016.000 $2.016,000 Variable factory overhead 1,260,000 1.440,000 1.620,000 During the current quarter, the company operated at 70% of capacity and produced 42.000 units of prod- uct: direct labor hours worked were 250,000. Units produced were assigned the following standard costs: Direct materials (1.050,000 Ilbs.@$4 per lb) .$4.200.000 Direct labor (252.000 hrs.@$8 per hc).2.016,000 Factory overhead (252,000 hrs. @$12 per hr)3.024,000 Total standard cost... $9.240,000Explanation / Answer
1. Direct materials price variance = (Standard cost - Actual cost)*Actual quantity
= (4-4.25)*(1000000)
= 250,000 U
Direct materials quantity variance = (standard quantity - actual quantity)*standard cost
= (1050000-1000000)*4 = 200,000 F
The net direct materials variance = 250,000-200,000
= 50,000 U
Labour efficiency variance = (standard time allowed - Actual time used)*standard rate
= (252000-250000)*8
= 16000 F
Labour rate variance = (standard rate - actual rate)*Actual hours
= (8-7.75)*250000
= 62500 F
Total labour variance = 16000+62500 = 78500F
3. Controllable overhead = Actual overhead - Overhead based on standard rate
= 1960000+1200000 - (2016000+1260000)
= 116000 F
Volume variance = overhead based on standard rate - overhead charged to production
= (2016000+1260000)-(6*42000*12)
= 252000 U
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