Sammy Corp manufactures helmets. Sammy uses a standard costing system with the f

Question

Sammy Corp manufactures helmets. Sammy uses a standard costing system with the following standards: STANDARD            Quantity       Price         

Direct Materials -----------1000 pounds -------------------$12 per lb.

Direct Labor------------------ 2500 hours--------------------$20 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)

Standard Material cost = 1000 pounds * 12 = 12000

Actual material cost = 900 pounds * 15 = 13500

Overall material variance = 13500 - 12000 = 1500 Unfavorable

b) Material price variance = Actual quantity used ( Std rate - Act rate ) = 900 ( 12 - 15) = 2700 Unfavorable

(c) Material usage variance = Standard Price ( std quantity - act quantity) = 12 ( 1000 - 900) = 1200 Favorable

(d) Direct Labor Efficiency Variance = Std rate ( Standard Hours - Actual Hours ) = $14,000 (F)....given

= 20 ( 2500 - AH ) = 14000

2500 - AH = 700

Actual labor hours worked = 2500 - 700 = 1800 hours

e.What is the Direct Labor Wage Variance ?

Wage variance = Actual Hours ( Std rate - Actual rate)

= 1800 ( 20 - 25) = 9000 Unfavorable

f. What is the overall Direct Labor Variance ?

Standard labor cost - Actual labor cost = 2500 * 20 - 1800 * 25 = 5000 Favorable

g. What was the budgeted amount of Variable Overhead ?

= 2500 DLH * 30 per hour = $ 75000

h. Variable OH spending variance = 75000 - 70000 = 5000 Favorable

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