Question

Problem 9-18 Comprehensive Variance Analysis [LO9-4, LO9-5, LO9-6]

Answer 1

Answer:

1 a. Materials price and quantity variances.

Material price variance = (Actual price - Standard price) * Actual Quantity purchased

= ($2.45 - $2) * 15,800

= $0.45 * 15,800

= $7110 (Unfavorable)

Materials Quantity variance = (Actual Quantity used - Standard Quantity allowed) * Standard price  

(10600 - 3000 * 3.6) * $2

= (10,600 -  10,800) * $2

= 200 * $2

= 400 (Favorable)

b. Labor rate and efficiency variances.

Labor rate variance = (Actual rate - standard rate) * Actual hours

= (6.30 - 6.6) * 2,100

= 0.3 * 2,100

= 630 (Favorable)

Labor Efficiency variance  = (Actual hours - standard hours allowed) *  Standard rate  

= (2100 - 3000 * 0.5) * 6.6

= (2,100 - 1,500) * 6.6

= 600 * 6.6

= 3960 (Unfavorable)

c. Variable overhead rate and efficiency variances

Variable overhead rate variance  = (Actual rate - Standard rate * Actual machine hours)

= 3000 - (2.10 * 1200)

= 3,000 - 2,520

= 480 Unfavorable

Variable overhead Efficiency variance = (Actual hours - standard hours allowed)* Standard rate

= (1200 - 3000 * 0.3) * 2.10    

= (1200 - 900) * 2.10

= 300 * 2.10

= 630 (Unfavorable)

2.    Variances                                            Amount

Material price variance                             7,110 U

Material quantity variance                         400 F

Labor rate variance                                    630 F

Labor efficiency variance                           3,960 U

Variable overhead rate variance               480 U

Variable overhead efficiency variance      630 U

Net variance                                                11,150 U

The net variance of all the variance of the month is 11,150 (Unfavorable)