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HGTC Company

HGTC Company uses a standard cost system for its single product. The following data are available:
Actual experience for the current year:

Purchases of raw materials (15,000 yards at $13) $195,000
Raw materials used 12,000 yards
Direct labor costs (10,200 hours at $10) $102,000
Actual variable overhead cost $84,150
Units produced 12,600 units

Standards per unit of product:
Raw materials 1.1 yards at $15 per yard
Direct labor 0.80 hours at $9.50 per hour
Variable overhead $8 per direct labor hour

Required:

Compute the following variances for raw materials, direct labor, and variable overhead, assuming that the price variance for materials is recognized at point of purchase:

a. Direct materials price variance

b. Direct materials quantity 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

HGTC Company uses a standard cost system for its single product. The following data are available:
Actual experience for the current year:

Purchases of raw materials (15,000 yards at $13) $195,000
Raw materials used 12,000 yards
Direct labor costs (10,200 hours at $10) $102,000
Actual variable overhead cost $84,150
Units produced 12,600 units

Standards per unit of product:
Raw materials 1.1 yards at $15 per yard
Direct labor 0.80 hours at $9.50 per hour
Variable overhead $8 per direct labor ...

Solution Summary

This solution is comprised of a detailed explanation to compute the following variances: -
a. Direct materials price variance
b. Direct materials quantity variance
c. Direct labor rate variance
d. Direct labor efficiency variance
e. Variable overhead spending variance
f. Variable overhead efficiency variance

$2.19