Sammy Corp manufactures helmets. Sammy usesa standard costing system with the fo

Question

Sammy Corp manufactures helmets. Sammy usesa standard costing system with the following standards: STANDARD Quantity Price Direct Materials--1 1000 pounds - $12 per lb Direct Labor 2500 hours S20 per hour Variable OH $30 per DLH a. The actual amount of direct materials purchased and used last period was 900 pounds. The average price paid was $15.00 per pound. What is the overall Direct Material Variance? b.What is the Direct Materials Price Variance? c. What is the Direct Materials Quantity Variance? d. The actual direct labor costs last period were $25.00 per hour. Sammy assumed that by paying the workers more than the standard, the workers' higher efficiency would make up for the higher costs. Last period the Direct Labor Efficiency Variance was $14,000 (F). How many direct labor hours were actually used last period? e.What is the Direct Labor Wage Variance? f. What is the overall Direct Labor Variance? g. What was the budgeted amount of Variable Overhead ? h. The actual variable overhead costs were $70,000 What was the variable overhead spending variance?

Explanation / Answer

a. Direct material variance = Standard cost - actual cost
= (1,000*$12) - (900*$15)
= 12,000 - 13,500 = 1,500 U
b. Direct material price variance = (Standard Price – Actual Price) * Actual Quantity
= (12-15)*900 = 2,700 U
c. Direct material quantity variance = (Standard Quantity – Actual Quantity) * Standard Price
= (1,000-900) * 12
= 1,200F

d. Given that Direct Labor efficiency variance = $14,000F
Direct Labor efficiency variance = (Standard Hours – Actual Hours) * Standard Rate
14,000F = (2,500- Actual hours)*$20
14,000F = 50,000- 20Actual hours
20 Actual hours = 50,000 - 14,000
20 actual hours = 36,000
Actual hours = 36,000 / 20 = 1,800hours

e. Direct Labor wage variance = (Standard rate – Actual rate) * Actual hours
= (20-25)*1,800 = 9,000U
f. Direct labor variance = Standard cost - actual cost
= ($20*2,500) - ($25*1,800)
= 50,000 - 45,000 = 5,000F
g. Budgeted amount of variable overhead = Standard hours * Direct labor hors
= 2,500 hours * $30 per hour = $75,000.
h. Variable overhead spending variance = (Standard Rate * Actual hours) - Actual Variable Overhead Cost
= (30* 1,800) - 70,000
= 54,000 - 70,000 = 16,000U

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