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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
    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 ad1c9bdddf
    https://brainmass.com/business/accounting/how-do-you-compute-the-variance-for-second-inc-392862

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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

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