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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 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 ...

    Solution Summary

    The solution explains how to calculate the various material, labor and overhead variances