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    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
    Variable overhead spending variance.
    Variable overhead efficiency variance.

    © BrainMass Inc. brainmass.com October 1, 2020, 5:19 pm ad1c9bdddf
    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.

    $2.19

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