Purchase Solution

# Calculation of variances

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Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 lbs. @ \$ 6.80/lb.
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 hrs. @ \$14.00/hr.
Variable overhead (based on machine hours) . . . . . . . . . . 1.5 hrs. @ \$ 4.50/hr. the following activity took place:
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.
\$12,513 actual variable overhead costs were incurred.
Required:
Calculate the following variances and provide plausible explain results

##### Solution Summary

The overhead variances have been calculated.

##### Solution Preview

The other variances apart from the ones that you have asked for have also been calculated so that you get the complete picture.

Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 lbs. @ \$ 6.80/lb.
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 hrs. @ \$14.00/hr.
Variable overhead (based on machine hours) . . . . . . . . . . 1.5 hrs. @ \$ 4.50/hr. the following activity took place:
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.
\$12,513 actual variable overhead costs were incurred.
Required:
Calculate the following variances and provide plausible explain results

Total Actual cost unit cost
Direct material purchased: 11,400 lbs a total cost of \$80,940 \$7.10 =80940/11400
Direct material used: 9,260 lbs @ 7.10 /lb 65,746
Direct labor used: 4420 hours at \$14.35 per hour 63,427
Variable overhead cost; total machine hrs used is 2910 hrs 12,513 \$4.30 =12513/2910

Solution:
Standard quantity per unit Standard rate Standard rate
Direct material Direct labour Variable ...

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