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Variance Analysis with Incomplete Data


(1a) Materials price variance: $12,400 F
(3) Variable overhead spending variance: $4,080 F

Far North Sporting, Ltd., manufactures a premium hockey stick. The standard cost of one hockey stick is:

Std. Qty or Hrs Std. Price or Rate Std. Cost
Direct materials ?feet $5.00/foot $?
Direct labor 1.5 hrs ?/hour ?
Variable manufacturing overhead ?hours $2.50/hr ?
Total standard cost $45.75

Last year, 12,000 hockey sticks were produced and sold. Selected cost data relating to last year's operations follow:

Dr. Cr.
Accounts payable-direct materials purchased (62,000 ft) $297,600
Wages payable (? hours) $236,640*
Work in process-direct materials $288,000
Direct labor rate variance $8,160
Variable overhead efficiency variance $6,000

*Relates to the actual direct labor cost for the year.

The following additional information is available for last year's operations:
a. No materials were on hand at the start of last year. Some of the materials purchased during the year were still on hand in the warehouse at the end of the year.
b. The variable manufacturing overhead rate is based on direct labor-hours. Total actual variable manufacturing overhead cost for last year was $46,920.
c. Actual direct materials usage for last year exceeded the standard by 0.2 feet per stick.


1. For direct materials:
a. Compute the price and quantity variances for last year.
b. Prepare journal entries to record all activities relating to direct materials for last year.
2. For direct labor:
a. Verify the rate variance given above and compute the efficiency variance for last year.
b. Prepare a journal entry to record activity relating to direct labor for last year.
3. Compute the variable overhead spending variance for last year and verify the variable overhead efficiency variance given above.
4. State possible causes of each variance that you have computed.
5. Prepare a standard cost card for one hockey stick.


Solution Summary

Excel file contains calculations of variances and journal entries to record all activities.