Question

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.
Inputs Standard Quantity or Hours per Unit of Output Standard Price or Rate
Direct materials 8.50 liters $ 8.10 per liter
Direct labor 0.60 hours $ 25.70 per hour
Variable manufacturing overhead 0.60 hours $ 7.00 per hour
The company has reported the following actual results for the product for September:

Actual output 10,700 units
Raw materials purchased 93,100 liters
Actual cost of raw materials purchased $ 771,500
Raw materials used in production 90,960 liters
Actual direct labor-hours 6,000 hours
Actual direct labor cost $ 160,302
Actual variable overhead cost $ 35,414
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.

(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Answer 1

Answer:

a. The materials price variance for September is $17,390 Unfav

b. The materials quantity variance for September is 81 Unfav

c. The labor rate variance for September is 6,102 Unfav

d. The labor efficiency variance for September is 107,954 Fav

e. The variable overhead rate variance for September is $6,586 Fav

f. The variable overhead efficiency variance for September is 2,940 Fav

Explanation:

a.  According to the given data we have the following:

Std material qty for actual output= (10700*8.50)= 90,950  

Std material price per liter= $8.1  

Actualq ty purchased= 93,100  

Actual qty used =90,960  

Actual price= (771,500/93,100)=$8.286788  

Therefore, Material price variance= Actual qty prucased (Std price - Actual price)

Material price variance= 931,00 ($8.10 -$8.29) = $ 17,390 Unfav

b. To calculate the materials quantity variance for September we would have to use the following formula:

Material qty variance= Std price (Std quantity-Actual quantity)  

Material qty variance= $8.10(90950-90960)= 81 Unfav

c. To calculate the labor rate variance for September we would have to use the following formula:

Labour rate variance= Actual hours (Std rate-Actual rate)

Std labour hours allowed= (10700*0.60)= 6420 hours  

Std rate per hour= $ 25.70 per hour    

Actual labour hours= 6000 hour    

Actual rate per hour=(160302/6000)=26.717  

Therefore, Labour rate variance= 6000 (25.70 -26.717) = 6,102 Unfav

d. To calculate the lthe labor efficiency variance for September we would have to use the following formula:

Labour Efficiency variance= Std rate (Std hourrs-Actual hours)  

Labour Efficiency variance=25.70 (6420 -6000) = 107,954 Fav

e. To calculate the variable overhead rate variance for September we would have to use the following formula:

Variable Oh rate variance= Actual hours (Std OH rate-Actual OH rate)

Std variable OH rate per hour: 7 pr hor    

Actuall variable OH rate per hour (35414/6000): 5.902 Per hour  

Therefore, Variable Oh rate variance= 6000 ( 7.00 -5.902) = $ 6,586 Fav

f. To calculate the variable overhead efficiency variance for September we would have to use the following formula:

Variable OH efficiency variance= Std OH rate (Std hours-Actual hours)

Variable OH efficiency variance= 7.00 (6420 - 6000) = 2,940 Fav