MATERIALS, LABOR, AND OVERHEAD VARIANCES Bertgon Manufacturing has the following standard cost sheet...

Question

MATERIALS, LABOR, AND OVERHEAD VARIANCES Bertgon Manufacturing has the following standard cost sheet for one of its products: 




Direct materials (6 ft. @ $5)


$30




Direct labor (1.5 hrs. @ $10)


15




Fixed overhead (1.5 hrs. @ $2*)


3




Variable overhead (1.5 hrs. @ $4*)


6




Standard unit cost


$54




During the most recent year, the following actual results were recorded:




Production


12,000 units




Fixed overhead


$33,000




Variable overhead


$69,000




Direct materials (71,750 ft. purchased)


$361,620




Direct labor (17,900 hrs.)


$182,580




Required:
Compute the following variances:
1. Direct materials price and usage variances.
2. Direct labor rate and efficiency variances.
3. Variable overhead spending and efficiency variances.
4. Fixed overhead spending and volume variances.

David · Accepted Answer

Standard rate = SR  
Standard quantity = SQ 
Actual rate= AR 
Actual quantity =AQ 
Standard hours =SH 
Actual hours =AH 
 
MATERIAL PRICE VARIANCE 
 = ( SR- AR ) AQ 
=(SR*AR)- (AR*AQ) 
=(5*71750)-361620 
=363750-361620 = 2130 UNFAVOURABLE 
 
MATERIAL USAGE VARIANCE 
=(SQ-AQ)SR 
=[(6*12000)-71750] * 5 
=72000-71750 )*5 
=1250 FAVOURABLE  
 
LABOUR RATE VARIANCE  
=(SR-AR)AH 
=(10*17900)-182580 
=179000-182580=3580 UNFAVOURABLE  
 
LABOUR EFFICIENCY VARIANCE  
= (SH-AH) SR  
=[(12000*1.5)- 17900]* 10 
=1000 FAVOURABLE  
 
VARIABLE OVERHEAD EFFICIENCY VARIANCE  
= (SH-AH)SR 
=(18000-17900)4 
=400 FAVOURABLE  
 
VARIABLE OVERHEAD SPENDING VARIANCE  
=STANDARD OVERHEAD – ACTUAL OVERHEAD  
= (17900*4)- 69000 
= 71600-69000 
=2600 FAVOURABLE  
 
FIXED OVERHEAD SPENDING VARIANCE  
=BUDGETED OVERHEAD – ACTUAL OVERHEAD  
= 33000-36000 
=3000 UNFAVOURABLE  
 
FIXED OVERHEAD EFFICIENCY VARIANCE  
= BUDGETED * FIXED OVERHEAD PER OUTPUT – ACTUAL * FIXED OVERHEAD 
PER OUTPUT  
= (36000-33000) 
=3000 FAVOURABLE

MATERIALS, LABOR, AND OVERHEAD VARIANCES Bertgon Manufacturing has the following standard cost sheet for one of its products: Direct materials (6 ft. @ $5) $30 Direct labor (1.5 hrs. @ $10) 15 Fixed...

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Direct materials (6 ft. @ $5)	$30
Direct labor (1.5 hrs. @ $10)	15
Fixed overhead (1.5 hrs. @ $2*)	3
Variable overhead (1.5 hrs. @ $4*)	6
Standard unit cost	$54

Production	12,000 units
Fixed overhead	$33,000
Variable overhead	$69,000
Direct materials (71,750 ft. purchased)	$361,620
Direct labor (17,900 hrs.)	$182,580