Answer:
See the explanation below.
Explanation:
Given the following information:
The standard costs associated with this level of production are:
Total Per Set of Covers
Direct materials $54,825 $25.50
Direct labor $10,750 5.00
Variable man o/h (based on direct labor-hrs) $5,375 <u> 2.50 </u>
<u>$33.00 </u>
The following actual costs were recorded during the month:
Total Per Set of Covers
Direct materials (12,500 yards) $58,750 $23.50
Direct labor $31,000 5.20
Variable manufacturing overhead $7,000 <u> 2.80 </u>
<u> $31.50 </u>
1. Compute the materials price and quantity variances for August.
Actual unit of production = 2,500 units
Actual material price per yard = $58,750 / 12,500 = $4.70
Total standard quantity required = 2,500 * 3 = $7,500
Material required to produce 1 unit of cover is 3 yards
Standard price per yard = $25.50 / 3 = $8.50 yard
Therefore, we have:
Material price variance = (Actual price per yard - Standard price per yard) * Actual yards = ($4.70 - $8.50) * 12,500 = - $47,500 favorable
Material quantity variance = (Actual quantity - Standard quantity) * Standard price per yard = (12,500 - 7,500) * $8.50 = $42,500 adverse
2. Compute the labor rate and efficiency variances for August.
Actual direct labor hours = 800 hours
Actual price per direct labor hour = $31,000 / 800 = $38.75
Standard direct labor cost per hour = $10,750 / 1,075 = $10
Standard labor hours used = 2,500 * 0.50 = 1,250 hours
Labor price variance = (Actual price per labor hour - Standard price per labor hour) * actual labor hours = ($38.75 - $10.00) * 800 = $23,000 adverse
Labor quantity variance = (actual labor hours - standard labor hours) * Standard price per labor hour = (800 - 1,250) * $10 = $4,500 favorable.
3. Compute the variable overhead rate and efficiency variances for August.
Budgeted variable manufacturing overhead cost = $5.00 per labor hour
Actual labor hours = 800 hours
Standard labor hours = 2,500 * 0.50 = 1,250 hours
Actual variable manufacturing costs = $7,000 / 800 = $8.75 per labor hour
Variable overhead Rate variance = actual labor hours * (actual variable overhead rate per DLH x budgeted variable overhead rate per DLH) = 800 * ($8.75 * $5.00) = $3,000 adverse
Variable overhead efficiency variance = budgeted variable overhead rate per DLH * (Actual labor hours - budgeted labor hours required) = $5.00 * (800 - 1,250) = - $2,250 favorable.
