Lido Company's standard and actual costs per unit for the most recent period, during which 500 units were actually produced, are given below:??StandardActual?Materials:??? Standard: 2 feet × $1.50 per foot$3.00?? Actual: 1.9 feet × $1.60 per foot?$3.04?Direct labor:??? Standard: 1.5 hours × $6.00 per hour9.00?? Actual: 1.7 hours × $6.30 per hour?10.71?Variable manufacturing overhead:??? Standard: 1.5 hours × $3.40 per hour5.10?? Actual: 1.7 hours × $3.00 per hour 5.10?Total unit cost$17.10$18.85All of the materials purchased during the period were used in production during the period.Required:From the foregoing information, compute the following variances. Indicate whether the variance is favorable (F) or unfavorable

Question

(U):a. Material price variance.b. Material quantity variance.c. Labor rate variance.d. Labor efficiency variance.e. Variable overhead rate variance.f. Variable overhead efficiency variance.

What will be an ideal response?

Answer 1

a. Actual quantity of materials used = 1.9 feet per unit × 500 units = 950 feet
Materials price variance = AQ × (AP - SP)
= 950 feet × ($1.60 per foot - $1.50 per foot)
= 950 feet × ($0.10 per foot)
= $95 U

b. Materials quantity variance = (AQ - SQ) × SP
= [950 feet - (2 feet per unit × 500 units)] × $1.50 per foot
= [950 feet - 1,000 feet] × $1.50 per foot
= -50 feet × $1.50 per foot
= $75 F

c. Actual direct labor-hours = 1.7 hours per unit × 500 units = 850 hours
Labor rate variance = AH × (AR - SR)
= 850 hours × ($6.30 per hour - $6.00 per hour)
= 850 hours × ($0.30 per hour)
= $255 U

d. Labor efficiency variance = (AH - SH) × SR
= [850 hours - (1.5 hours per unit × 500 units)] × $6.00 per hour
= [850 hours - 750 hours] × $6.00 per hour
= [100 hours] × $6.00 per hour
= $600 U

e. Variable overhead rate variance = AH × (AR - SR)
= 850 hours × ($3.00 per hour - $3.40 per hour)
= 850 hours × (-$0.40 per hour)
= $340 F

f. Variable overhead efficiency variance = (AH - SH) × SR
= (850 hours - 750 hours) × $3.40 per hour
= (100 hours) × $3.40 per hour
= $340 U