Variances
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The standards for one case of Dimwits are:
Direct materials 7.5 lbs @ $1.30 / lb
Direct labor 5 hours @ $11 / hr
Variable overhead (based on machine hours) 5 hours @ $6.50 /hr
During the week ending September 28, the following activity took place:
20,600 lbs of raw material were purchased for inventory at a cost of $1.35 per pound
2,400 cases of finished product were produced and 17,100 lbs of raw material were used
13,400 labor hours were worked at a total cost of $131,320
$81,740 actual variable overhead costs were incurred
Calculate each of the following variances:
a) raw materials purchase price variance
b) raw materials usage variance
c) direct labor rate variance
d) direct labor efficiency variance
e) variable overhead spending variance
f) variable overhead efficiency variance
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Solution Summary
The solution explains how to calculate the various material, labor and overhead variances
Solution Preview
a) raw materials purchase price variance
Price Variance = (Actual Price - Standard Price) X Quantity Purchased
Price Variance = (1.35 - 1.30) X 20,600 = $1,030 Unfavorable as the actual price is higher than standard price
b) raw materials usage variance
Usage variance = (Actual Quantity used - Standard Quantity at Actual Production) X Standard Rate
Actual Quantity used = 17,100
Standard ...
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