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 9.30 liters $ 8.90 per liter
Direct labor 0.70 hours $ 25.70 per hour
Variable manufacturing overhead 0.70 hours $ 7.80 per hour
The company has reported the following actual results for the product for September:
Actual output 11,500 units
Raw materials purchased 107,900 liters
Actual cost of raw materials purchased $ 979,500
Raw materials used in production 106,980 liters
Actual direct labor-hours 7,750 hours
Actual direct labor cost $ 205,302
Actual variable overhead cost $ 55,414
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.

Answer 1

Answer:

a) The materials price variance 19026.33 unfav

b) Material Quantity Variance= $ 267 Unfav

c) Direct Labor Rate variance= $ 6127 Unfav

d) Direct labor Efficiency variance= 7710 Fav

e) Variable Overhead Rate Variance= 13099 fav

f) Variable Overhead Efficiency Variance= 3256.25  unfav

Explanation:

First We find the missing figures such as standard quantity ,hours allowed , actual price, rate. Then we list the formulae to use. After that we put in the values of the amounts in the formulae to get the results. Unfavorable variances are those in which the actual quantities are greater than the standard quantities or input .

Kropf Inc.

Given Standards

Direct materials 9.30 liters $ 8.90 per liter

Standard Quantity allowed = 9.3 * 11500= 106950 Litres

Direct labor 0.70 hours $ 25.70 per hour

Variable manufacturing overhead 0.70 hours $ 7.80 per hour

Standard Hours Allowed = $ 0.7 *11500= 8050

Actual Results Given

Actual output 11,500 units

Raw materials purchased 107,900 liters

Actual cost of raw materials purchased $ 979,500

Actual Price= Cost/ Purchases=  $ 979,500/107,900 = $9.08

Raw materials used in production 106,980 liters

Actual direct labor-hours 7,750 hours

Actual direct labor cost $ 205,302

Actual Rate=$ 205,302 / 7,750 = $ 26.49

Actual variable overhead cost $ 55,414

Actual Overhead Rate= $ 55,414/7,750 = $ 7.15

Formulae to use

1)The materials price variance = (Actual Price * Actual Quantity)- (Standard Price * Actual Quantity)

2) Material Quantity Variance= (Standard Price * Actual Quantity)-(Standard Price * Standard Quantity)

3) Direct Labor Rate variance= (actual hours* actual rate)- (actual hours * standard rate)

4) Direct labor Efficiency variance= (actual hours* standard rate)- (standard hours * standard rate)

5) Variable Overhead Rate Variance= Actual Variable Overhead- Standard Variable Overhead

6)Variable Overhead Efficiency Variance=( Actual Hours * Standard Variable Overhead Rate)-( Standard Hours * Standard Variable Overhead Rate)

Working

1)The materials price variance = (Actual Price * Actual Quantity)- (Standard Price * Actual Quantity)

The materials price variance = ( $9.08*106,980 )- ($ 8.90 *106,980)

The materials price variance = (971148.38)- (952122)=19026.33 unfav

2) Material Quantity Variance= (Standard Price * Actual Quantity)-(Standard Price * Standard Quantity)

Material Quantity Variance=($ 8.90 *106,980)-($ 8.90 *106,950)= $ 267 Unfav

3) Direct Labor Rate variance= (actual hours* actual rate)- (actual hours * standard rate)

Direct Labor Rate variance= ( 7,750*$ 26.49)- (7,750*$ 25.70)= $ 6127 Unfav

4) Direct labor Efficiency variance= (actual hours* standard rate)- (standard hours * standard rate)

Direct labor Efficiency variance=(7,750*$ 25.70)-(8050*$ 25.70)= 7710 Fav

5) Variable Overhead Rate Variance= Actual Variable Overhead- Standard Variable Overhead

Variable Overhead Rate Variance=$ 55,414-( Actual Hours * Standard Variable Overhead Rate)

Variable Overhead Rate Variance=$ 55,414-(7,750*0.70 * $ 7.80)

Variable Overhead Rate Variance=$ 55,414- 42315= 13099 fav

6)Variable Overhead Efficiency Variance=( Actual Hours * Standard Variable Overhead Rate)-( Standard Hours * Standard Variable Overhead Rate)

Variable Overhead Efficiency Variance= (7,750*0.70 * $ 7.80)- (7,750*0.70 * $ 7.15)=42315- 38788.15= 3256.25  unfav