Photo Corporation makes a product with the following standard costs:InputsStandard Quantity or Hours Standard Price or RateDirect materials 7.8kilos $1.00per kiloDirect labor 0.4hours $18.00per hourVariable overhead 0.4hours $3.00per hourThe company reported the following results concerning this product in August. Actual output 8,500unitsRaw materials used in production 65,550kilosPurchases of raw materials 69,000kilosActual direct labor-hours 3,410hoursActual cost of raw materials purchases$75,900 Actual direct labor cost$66,495 Actual variable overhead cost$9,889 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 materials
quantity variance.b. Compute the materials price variance.c. Compute the labor efficiency variance.d. Compute the direct labor rate variance.e. Compute the variable overhead efficiency variance.f. Compute the variable overhead rate variance.
What will be an ideal response?
a.
Materials quantity variance = SP(AQ - SQ)
= $1.00 per kilo (65,550 kilos - 66,300 kilos*)
= $65,550 - $66,300
= $750 F
*8,500 units × 7.8 kilos = 66,300 kilos
b.
Materials price variance = (AQ × AP) - (AQ × SP)
= $75,900 - (69,000 kilos × $1 per kilo)
= $75,900 - $69,000
= $6,900 U
c.
Labor efficiency variance = SR(AH - SH)
= $18 per hour (3,410 hours - 3,400 hours*)
= $61,380 - $61,200
= $180 U
*8,500 units ×.4 hours = 3,400 hours
d.
Labor rate variance = (AH × AR) - (AH × SR)
= $66,495 - (3,410 hours × $18 per hour)
= $66,495 - $61,380
= $5,115 U
e.
Variable overhead efficiency variance = SR(AH - SH)
= $3 per hour (3,410 hours - 3,400 hours*)
= $10,230 - $10,200
= $30 U
*8,500 units ×.4 hours = 3,400 hours
f.
Variable overhead rate variance = (AH × AR) - (AH × SR)
= $9,889 - (3,410 hours × $3 per hour)
= $9,889 - $10,230
= $341 F
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