# Calculation of variances

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

Variable overhead spending variance.

Variable overhead efficiency variance.

https://brainmass.com/business/strategy-and-business-analysis/calculation-of-variances-33304

#### 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

Variable overhead spending variance.

Variable overhead efficiency variance.

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 ...

#### Solution Summary

The overhead variances have been calculated.