# How do you compute the variance for Second, Inc.?

See attach file.

SECOND, INC. HAD THE FOLLOWING STANDARD COST CARD FOR ITS PRODUCT A:

DIRECT MATERIALS 2 LBS @ $4.00 PER POUND $ 8.00

DIRECT LABOR 4 HOURS @ $8.00 PER HOUR. 32.00

VARIABLE OVERHEAD 4 LABOR HOURS @ $5.00 PER LABOR HOUR 20.00

FIXED OVERHEAD 4 LABOR HOURS @ $6.00* PER LABOR HOUR 24.00

TOTAL STANDARD COST OF ONE UNIT OF OUTPUT $ 84.00

*PLANNED AND DENOMINATOR CAPACITY WAS 5,000 UNITS. ALL OVERHEAD

IS BASED ON DIRECT LABOR HOURS. THE $6.00 PER DIRECT LABOR HOUR FIXED OVERHEAD RATE WAS DETERMINED AS FOLLOWS:

BUDGETED. FIXED OVERHEAD $120,000/20,000 DIRECT LABOR HOURS = $6.00

(5,000 UNITS X 4 DIRECT LABOR HOURS

PER UNIT.)

ACTUAL RESULTS FOR THE PERIOD WERE:

OUTPUT WAS 4,500 UNITS.

DIRECT MATERIALS PURCHASED 20,000 POUNDS @ $3.50 PER POUND.

DIRECT MATERIALS USED10,000 POUNDS

DIRECT LABOR 19,000 HOURS @ $9.00

VARIABLE OVERHEAD $96,000

FIXED OVERHEAD $128,000

REQUIRED: (SHOW ALL WORK FOR THIS PROBLEM ON WORK SHEET PROVIDED ON PAGE 2).

_____AMOUNT______ __FAV/UNF___

1. MATERIAL PRICE VARIANCE (PURCHASES) ____________________ ______________

2. MATERIAL EFFICIENCY VARIANCE ____________________ ______________

3. LABOR PRICE VARIANCE ____________________ ______________

4. LABOR EFFICIENCY VARIANCE ____________________ ______________

5. LABOR BUDGET VARIANCE ____________________ ______________

6. VARIABLE OVERHEAD PRICE VARIANCE ____________________ ______________

7. VARIABLE OVERHEAD EFFICIENCY VAR. ____________________ ______________

8. VARIABLE OVERHEAD BUDGET VARIANCE ____________________ ______________

9. FIXED OVERHEAD BUDGET VARIANCE ____________________ ______________

10. FIXED OVERHEAD DENOMINATOR VAR. ____________________ ______________

11. STANDARD COST OF 4,500 UNITS PRODUCED ___________________________

12. ACTUAL COST OF 4,500 UNITS PRODUCED. ___________________________

© BrainMass Inc. brainmass.com June 4, 2020, 1:19 am ad1c9bdddfhttps://brainmass.com/business/accounting/how-do-you-compute-the-variance-for-second-inc-392862

#### Solution Preview

See attached file.

The work is in a diagram in Excel so you can have a template for similar work and can see how the amounts are related. There is a separate diagram for materials and labor vs. variable and fixed ...

#### Solution Summary

The work is in a diagram in Excel so you can have a template for similar work and can see how the amounts are related. There is a separate diagram for materials and labor vs. variable and fixed overhead. The formulas are the cells (just click on cell to see). This is not a "detailed formula sheet" where everything is written out "long hand." This response presumes some familiarity with standard costing variances.