Standard Cost, Overhead Rate and Price Variance
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FOURTH, INC. HAD THE FOLLOWING STANDARD COST CARD FOR ITS PRODUCT A:
DIRECT MATERIALS 2 LBS @ $4.00 PER POUND $ 8.00
DIRECT LABOR 4 HOURS @ $8.00 PER HOUR. 32.00
VARIABLE OVERHEAD 4 LABOR HOURS @ $5.00 PER LABOR HOUR 20.00
FIXED OVERHEAD 4 LABOR HOURS @ $6.00* PER LABOR HOUR 24.00
TOTAL STANDARD COST OF ONE UNIT OF OUTPUT $ 84.00
======
*PLANNED AND DENOMINATOR CAPACITY WAS 5,000 UNITS. ALL OVERHEAD
IS BASED ON DIRECT LABOR HOURS. THE $6.00 PER DIRECT LABOR HOUR FIXED OVERHEAD RATE WAS DETERMINED AS FOLLOWS:
BUDGETED. FIXED OVERHEAD $120,000/20,000 DIRECT LABOR HOURS = $6.00
(5,000 UNITS X 4 DIRECT LABOR HOURS
PER UNIT.)
ACTUAL RESULTS FOR THE PERIOD WERE:
OUTPUT WAS 4,000 UNITS.
DIRECT MATERIALS PURCHASED 20,000 POUNDS @ $3.50 PER POUND.
DIRECT MATERIALS USED10,000 POUNDS
DIRECT LABOR 19,000 HOURS @ $9.00
VARIABLE OVERHEAD $96,000
FIXED OVERHEAD $128,000
REQUIRED: (SHOW ALL WORK FOR THIS PROBLEM ON WORK SHEET PROVIDED ON PAGE 2).
_____AMOUNT______ __FAV/UNF___
1. MATERIAL PRICE VARIANCE (PURCHASES) ____________________ ______________
2. MATERIAL EFFICIENCY VARIANCE ____________________ ______________
3. LABOR PRICE VARIANCE ____________________ ______________
4. LABOR EFFICIENCY VARIANCE ____________________ ______________
5. LABOR BUDGET VARIANCE ____________________ ______________
6. VARIABLE OVERHEAD PRICE VARIANCE ____________________ ______________
7. VARIABLE OVERHEAD EFFICIENCY VAR. ____________________ ______________
8. VARIABLE OVERHEAD BUDGET VARIANCE ____________________ ______________
9. FIXED OVERHEAD BUDGET VARIANCE ____________________ ______________
10. FIXED OVERHEAD DENOMINATOR VAR. ____________________ ______________
11. STANDARD COST OF 4,000 UNITS PRODUCED ___________________________
12. ACTUAL COST OF 4,000 UNITS PRODUCED. ___________________________.
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The solution determines the standard cost, overhead rate and price variance.
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