Kropf Inc. has provided the following data concerning one of the products in its

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. Standard Quantity or Hours per Unit of Output Standard Price or Rate Inputs Direct materials Direct labor Variable manufacturing overhead 7.4 0.70 liters $7.00 per liter hours 21.70 per hour 0.70 hours 5.90 per hour company has reported the following actual results for the product for September: 9,600 units 75,000 liters Actual output Raw materials purchased Actual cost of raw materials purchased Raw materials used in production Actual direct labor-hours Actual direct labor cost Actual variable overhead cost 562,500 71,050 liters 6,410 hours $ 142,302 $ 34,614 uired: ompute the materials price variance for September. mpute the materials quantity variance for September. mpute the labor rate variance for September mpute the labor efficiency variance for September. mpute the variable overhead rate variance for September. mpute the variable overhead efficiency variance for September.

Explanation / Answer

Material Price Variance (Standard Price - Actual Price) X Actual Quantity Consumed = [7.00 - (562,500/75,000)] X 71,050 Liters = 35,525 Unfavourable Material Quantity Variance (Standard Quantity for Actual Output - Actual Quantity) X Standard Price = [(9,600 x 7.4) - 71,050] X 7.00 = 70 Unfavourable Labour Rate Variance (Standard rate - Actual rate) X Actual Hours = [21.70 - (142,302/6,410)] X 6,410 hours = 3,205 Unfavourable Labour Efficieny Variance (Standard Hours for Actual Output - Actual Hours worked ) X Standard rate = [(9,600 x 0.7) - 6,410] X 21.70 = 6,727 Favourable Variable Overhead rate Variance (Standard rate - Actual rate) X Actual Hours Worked = [5.90 - (34,614/6,410)] X 6,410 hours = 3,205 Favourable Variable Overhead efficeinecy Variance (Standard Hours - Actual Hours worked ) X Standard rate = [(9,600 x 0.7) - 6,410] X 5.90 = 1,829 Favourable

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