Heye 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 Unitof OutputStandard Price or Rate?Direct materials 6.7 grams $7.80 per gram?Direct labor0.20 hours$19.00 per hour?Variable manufacturing overhead0.20 hours $8.30 per hourThe company has reported the following actual results for the product for August:?Actual output6,300 units?Raw materials purchased48,100 grams?Actual price of raw materials$7.00 per gram ?Raw materials used in production42,200 grams?Actual direct labor-hours1,350 hours?Actual direct labor rate$20.10 per hour?Actual variable overhead rate$9.00 per
hourRequired:a. Compute the materials price variance for August.b. Compute the materials quantity variance for August.c. Compute the labor rate variance for August.d. Compute the labor efficiency variance for August.e. Compute the variable overhead rate variance for August.f. Compute the variable overhead efficiency variance for August.
What will be an ideal response?
a. Materials price variance = (AQ × AP) - (AQ × SP)
= AQ × (AP - SP)
= 48,100 grams × ($7.00 per gram - $7.80 per gram)
= 48,100 grams × (-$0.80 per gram)
= $38,480 F
b. SQ = 6,300 units × 6.7 grams per unit = 42,210 grams
Materials quantity variance = (AQ × SP) - (SQ × SP)
= (AQ - SQ) × SP
= (42,200 grams - 42,210 grams) × $7.80 per gram
= -10 grams × $7.80 per gram
= $78 F
c. Labor rate variance = (AH × AR) - (AH × SR)
= AH × (AR - SR)
= 1,350 hours × ($20.10 per hour - $19.00 per hour)
= 1,350 hours × ($1.10 per hour)
= $1,485 U
d. SH = 6,300 units × 0.20 hours per unit = 1,260 hours
Labor efficiency variance = (AH × SR) - (SH × SR)
= (AH - SH) × SR
= (1,350 hours - 1,260 hours) × $19.00 per hour
= (90 hours) × $19.00 per hour
= $1,710 U
e. Variable overhead rate variance = (AH × AR) - (AH × SR)
= AH × (AR - SR)
= 1,350 hours × ($9.00 per hour - $8.30 per hour)
= 1,350 hours × ($0.70 per hour)
= $945 U
f. SH = 6,300 units × 0.20 hours per unit = 1,260 hours
Variable overhead efficiency variance = (AH × SR) - (SH × SR)
= (AH - SH) × SR
= (1,350 hours - 1,260 hours) × $8.30 per hour
= (90 hours) × $8.30 per hour
= $747 U
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