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

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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

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. ___________________________

#### Solution Preview

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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.

\$2.19