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 Standard Price or Rate
per Unit of Output
Direct materials
7.60 liters $ 7.20 per liter
Direct labor 0.60 hours 23.70 per hour
Variable manufacturing overhead 0.60 hours $ 6.10 per hour
The company has reported the following actual results for the product for September:
Actual output 9,800 units
Raw materials purchased 75,200 liters
Actual cost of raw materials purchased $ 564,500
Raw materials used in production 74,500 liters
Actual direct labor-hours 5,500 hours
Actual direct labor cost $ 135,302
Actual variable overhead cost $ 29,314
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.

Answer 1

Answer:

Instructions are below.

Explanation:

Giving the following information:

Direct materials 7.60 liters $ 7.20 per liter

Direct labor 0.60 hours 23.70 per hour

Variable manufacturing overhead 0.60 hours $ 6.10 per hour

Actual output 9,800 units

Raw materials purchased 75,200 liters

Actual cost of raw materials purchased $ 564,500

Raw materials used in production 74,500 liters

Actual direct labor-hours 5,500 hours

Actual direct labor cost $ 135,302

Actual variable overhead cost $ 29,314

1) To calculate the direct material price and quantity variance, we need to use the following formulas:

Direct material price variance= (standard price - actual price)*actual quantity

Actual pirce= 564,500/75,200= 7.51

Direct material price variance= (7.2 - 7.51)*75,200

Direct material price variance= $23,312 unfavorable

Direct material quantity variance= (standard quantity - actual quantity)*standard price

Direct material quantity variance= (7.6*9,800 - 74,500)*7.2

Direct material quantity variance= $144 favorable

2) To calculate the direct labor rate and efficiency variance, we need to use the following formulas:

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

Standard quantity= 0.6*9,800= 5,880

Direct labor time (efficiency) variance= (5,880 - 5,500)*23.7

Direct labor time (efficiency) variance= $9,006 favorable

Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity

Actual rate= 135,302/5,500= 24.6

Direct labor rate variance= (23.7 - 24.6)*5,500

Direct labor rate variance= $4,950 unfavorable

3) To calculate the variable overhead rate and efficiency variance, we need to use the following formulas:

Manufacturing overhead rate variance= (standard rate - actual rate)* actual quantity

Actual rate= 29,314/5,500= 5.33

Manufacturing overhead rate variance= (6.10 - 5.33)*5,500

Manufacturing overhead rate variance= $4,235 favorable

variable overhead efficiency variance= (Standard Quantity - Actual Quantity)*Standard rate

variable overhead efficiency variance= (0.6*9,800 - 5,500)*6.1

variable overhead efficiency variance= $2,318 favorable