Purchase Solution

# Calculate Variable Cost Variances

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Based on the information founds in Attachment file #1.

Calculate each of the following variances and provide plausible explanations for the results.
a. Price Variance for raw materials purchased
b. Raw materials usage variances
c. Direct labor rate variance
d. Direct labor efficiency variance
e. Variable overhead spending variance
f. Variable overhead efficiency variance.

##### Solution Summary

The solution calculates variable cost variances.

##### Solution Preview

You should first construct a table out for the standard cost:

Standard cost card
Product: Brightlites Total \$

Direct material
5 lbs
\$6.8 per lb
\$34
Direct labour 2.4 hours \$14 per hour \$33.6
Variable overhead 1.5 hours \$4.5 per hour \$6.75
Note: Standard variable overhead rates are based on machine hours.
The actual production details during the week ended May 30 are shown below.
2,910 machine hours were worked
11,400 lbs. of raw material were purchased for inventory at a total cost of \$80,940
1,900 cases of finished product were produced
9,260 lbs of raw material were used
4,420 labor hours were worked at an average rate of \$14.35 per hour
\$12513 actual variable overhead costs were incurred.

a. Price Variance for raw materials ...

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