Kropf Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.InputsStandard Quantity or Hours per Unit of OutputStandard Price or RateDirect materials 7.4liters$7.00per literDirect labor 0.70hours$21.70per hourVariable manufacturing overhead 0.70hours$5.90per hour?The company has reported the following actual results for the product for September: Actual output 9,600unitsRaw materials purchased 75,000litersActual cost of raw materials purchased 562,500 Raw materials used in production 71,050litersActual direct labor-hours 6,410hoursActual direct labor cost$142,302 Actual variable overhead cost$34,614 ?Required:?a. Compute the materials
price variance for September.?b. Compute the materials quantity variance for September.?c. Compute the labor rate variance for September.?d. Compute the labor efficiency variance for September.?e. Compute the variable overhead rate variance for September.?f. Compute the variable overhead efficiency variance for September.
What will be an ideal response?
a.
Materials price variance = (AQ × AP) ? (AQ × SP)
= $562,500 ? (75,000 liters × $7.00 per liter)
= $562,500 ? $525,000
= $37,500 U
b.
SQ = 9,600 units × 7.4 liters per unit = 71,040 liters
Materials quantity variance = (AQ × SP) ? (SQ × SP)
= (AQ - SQ) × SP
= (71,050 liters - 71,040 liters) × $7.00 per liter
= 10 liters × $7.00 per liter
= $70 U
c.
Labor rate variance = (AH × AR) ? (AH × SR)
= $142,302 ? (6,410 hours × $21.70 per hour)
= $142,302 ? $139,097
= $3,205 U
d.
SH = 9,600 units × 0.70 hours per unit = 6,720 hours
Labor efficiency variance = (AH × SR) - (SH × SR)
= (AH - SH) × SR
= (6,410 hours - 6,720 hours) × $21.70 per hour
= (?310 hours) × $21.70 per hour
= $6,727 F
e.
Variable overhead rate variance = (AH × AR) ? (AH × SR)
= $34,614 ? (6,410 hours × $5.90 per hour)
= $34,614 ? ($37,819)
= $3,205 F
f.
SH = 9,600 units × 0.70 hours per unit = 6,720 hours
Variable overhead efficiency variance = (AH × SR) - (SH × SR)
= (AH - SH) × SR
= (6,410 hours - 6,720 hours) × $5.90 per hour
= (?310 hours) × $5.90 per hour
= $1,829 F
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