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Magma Inc Cost and Revenue Variances: Actual DL Rate

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Use the following information to answer Questions 1, 2 and 3

Magma Inc. produces two products, A and B. Relevant budget information for this period for each of these products is presented in the table.

Product A Product B
Usage Cost /unit Usage Cost /unit
Direct Materials: Input A, @ $1.50 2.50 $3.75 3.00 $4.50
Input B, @ $5.00 1.00 $5.00 2.00 $10.00
Direct Labor: $25.00 per DLH 4.00 $100.00 3.00 $75.00
Variable Overhead: Applied at $2.50 /DLH 4.00 $10.00 3.00 $7.50
Fixed Overhead: Applied at $1.50 /DLH 4.00 $6.00 3.00 $4.50
Actual Input A material used 27,000 51,300
Actual Input B material used 10,750 32,500
Budgeted Volume in Units (Sales and Production)12,000 16,000
Actual Volume in Units (Sales and Production) 10,750 16,400

Assume, for all three questions, there is no opening or closing inventories.

1. Assume that at the end of the period there was a total efficiency (usage) direct labor favorable variance of $24,000 and a total rate (price) direct labor variance of $67,530 unfavorable. What was the actual direct labor hourly rate for the period?
a. $24.28
b. $25.00
c. $25.47
d. $25.71
e. $25.74

2. Based on the information provided, what is the total direct materials quantity (efficiency) variance?
a. $1,837 F
b. $1,837 U
c. $3,300 U
d. $4,838 U
e. $6,419 F

3. Assume now that the total actual direct labor hours used was 92,000 (this number has no bearing on the answer to question #1). What is the total variable overhead efficiency variance?
a. $500 U
b. $9,500 U
c. $500 F
d. $9,500 F
e. $10,000 F

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Solution Summary

Magma Inc cost and revenue variances for actual DL rates.

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