Sakelaris Corporation makes a product with the following standard costs:??Standard Quantity or HoursStandard Price or Rate?Direct materials8.6 kilos$6.00 per kilo?Direct labor0.4 hours$11.00 per hour?Variable overhead0.4 hours$5.00 per hourThe company reported the following results concerning this product in August.?Actual output8,400units?Raw materials used in production71,750kilos?Purchases of raw materials76,900kilos?Actual direct labor-hours3,320hours?Actual cost of raw materials purchases$469,090??Actual direct labor cost$35,524??Actual variable overhead cost$17,928?The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.Required:a. Compute the

Question

materials quantity variance.b. Compute the materials price variance.c. Compute the labor efficiency variance.d. Compute the labor rate variance.e. Compute the variable overhead efficiency variance.f. Compute the variable overhead rate variance.

What will be an ideal response?

Answer 1

a. SQ = 8,400 units × 8.6 kilos per unit = 72,240 kilos
Materials quantity variance = (AQ ? SQ) × SP
= (71,750 kilos ? 72,240 kilos) × $6.00 per kilo
= (?490 kilos) × $6.00 per kilo
= $2,940 F

b. Materials price variance = (AQ × AP) ? (AQ × SP)
= ($469,090) ?? (76,900 kilos × $6.00 per kilo)
= $469,090 ? $461,400
= $7,690 U

c. SH = 8,400 units × 0.4 hours per unit = 3,360 hours
Labor efficiency variance = (AH ? SH) × SR
= (3,320 hours ? 3,360 hours) × $11.00 per hour
= (?40 hours) × $11.00 per hour
= $440 F

d. Labor rate variance = (AH × AR) ? (AH × SR)
= ($35,524) ? (3,320 hours × $11.00 per hour)
= $35,524 ? $36,520
= $996 F

e. SH = 8,400 units × 0.4 hours per unit = 3,360 hours
Variable overhead efficiency variance = (AH ? SH) × SR
= (3,320 hours ? 3,360 hours) × $5.00 per hour
= (?40 hours) × $5.00 per hour
= $200 F

f. Variable overhead rate variance = (AH × AR) ? (AH × SR)
= ($17,928) ? (3,320 hours × $5.00 per hour)
= $17,928 ? $16,600
= $1,328 U