Buil Corporation manufactures a single product. The standard cost per unit of pr
ID: 2574387 • Letter: B
Question
Buil Corporation manufactures a single product. The standard cost per unit of product is as follows.
Direct materials—2 pounds of plastic at $6 per pound $12
Direct labor—2 hours at $13 per hour 26
Variable manufacturing overhead 7
Fixed manufacturing overhead 5
Total standard cost per unit $50
The master manufacturing overhead budget for the month based on normal productive capacity of 20,000 direct labor hours (10,000 units) shows total variable costs of $70,000 ($3.50 per labor hour) and total fixed costs of $50,000 ($2.50 per labor hour). Normal productive capacity is 20,000 direct labor hours. Overhead is applied on the basis of direct labor hours. Actual costs for November in producing 9,700 units were as follows.
Direct materials (20,000 pounds) $119,000
Direct labor (19,600 hours) 256,760
Variable overhead 68,800
Fixed overhead 50,000
Total manufacturing costs $494,560
The purchasing department normally buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.
Instructions
(a) Compute all of the materials and labor variances.
(b) Compute the total overhead variance.
(a) Total Materials Variance:
( AQ x AP )
-
( SQ x SP )
=
-
=
-
=
Materials Price Variance:
( AQ x AP )
-
( AQ x SP )
=
-
=
-
=
Total Materials Variance:
( AQ x AP )
-
( SQ x SP )
=
-
=
-
=
Total Labor Variance:
( AH x AR )
-
( SH x SR )
=
-
=
-
=
*9,700 x 2
Labor Price Variance:
( AH x AR )
-
( SH x SR )
=
-
=
-
=
Labor Quantity Variance:
( AH x SR )
-
( SH x SR )
=
-
=
-
=
(b) Total Overhead Variance:
Actual Overhead
-
Overhead Applied
=
-
=
-
=
( AQ x AP )
-
( SQ x SP )
=
-
=
-
=
Explanation / Answer
Total material variance = (standard cost-actual cost)
= (9700*12-119000)
Total material variance = 2600 U
Material price variance = (standard price-actual price) actual quantity
= (6*20000-119000)
Material price variance = 1000 F
Material quantity variance = (standard quantity -actual quantity )standard price
= (9700*2-20000)6
Material quantity variance = 3600 U
Total labour variance = (standard cost-actual cost)
= (9700*26-256760)
Total labour variance = 4560 U
Labour rate variance = (Standard price-actual price)actual hours
= (13*19600-256760)
Labour rate variance = 1960 U
Labour efficiency variance = (Standard hour-actual hour)standard price
= (9700*2-19600)13
Labour efficiency variance = 2600 U
Total overhead variance = actual overhead-overhead applied
= 118800-(19600*6)
Total overhead variance = 1200 U
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