Question

Cox Engineering performs cement core tests in its laboratory. The following standards have been set for each core test performed:Standard Hours or Quantity or Rate Standard PriceDirect materials 3 pounds $0.75 per poundDirect labor 0.4 hours $12 per hourVariable manufacturing overhead 0.4 hours $9 per hourDuring March, the laboratory performed 2,000 core tests. On March 1 no direct materials (sand) were on hand. Variable manufacturing overhead is assigned to core tests on the basis of standard direct labor-hours.The following events occurred during March:[1] 8,600 pounds of sand were purchased at a cost of $7,310.[2] 7,200 pounds of sand were used for core tests.[3] 840 actual direct labor-hours were worked at a cost of $8,610.[4] Actual variable manufacturing overhead incurred was $3,200.REQUIRED: (NOTE: You must show your computations)(a) The materials price variance for March is:(b) The materials quantity variance for March is:(c) The labor rate variance for March is:(d) The labor efficiency variance for March is:(e) The variable overhead efficiency variance for March is:

Answer 1

Answer: See explanation

Explanation:

(a) The materials price variance for March is:

Actual cost of materials purchased = $7310

Less: Standard cost of actual quantity = 0.75 × $8600 = ($6450)

Direct material price variance = $860 Unfavorable

(b) The materials quantity variance for March is:

Standard cost of actual quantity = 0.75 × $7200 = $5400

Less: Standard cost of standard quantity = 3 × 2000 × $0.75 = $4500

Direct material quantity variance = $900 Unfavorable

(c) The labor rate variance for March is:

Actual cost of direct labor = $8610

Less: Standard cost of actual hours = 840 × $12 = $10080

Direct labor rate variance = $1470 favorable

(d) The labor efficiency variance for March is:

Standard cost of actual hours = 840 × $12 = $10080

Less: Standard cost of standard hours = 2000 × 0.4 × $0.12 = $9600

Direct labor efficiency variance = $480 Unfavorable