ACCT 203 Chapter 4: Formular Variance

Buil Corporation manufactures a single product. The standard cost per unit of product is as follows.

Direct materials—2 pounds of plastic at $6 per pound $12

Direct labor—2 hours at $13 per hour 26

Variable manufacturing overhead 7

Fixed manufacturing overhead 5

Total standard cost per unit $50

The master manufacturing overhead budget for the month based on normal productive capacity of 20,000 direct labor hours (10,000 units) shows total variable costs of $70,000 ($3.50 per labor hour) and total fixed costs of $50,000 ($2.50 per labor hour). Normal productive capacity is 20,000 direct labor hours. Overhead is applied on the basis of direct labor hours. Actual costs for November in producing 9,700 units were as follows.

Direct materials (20,000 pounds) $119,000

Direct labor (19,600 hours) 256,760

Variable overhead 68,800

Fixed overhead 50,000

Total manufacturing costs $494,560

The purchasing department normally buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.

Instructions

(a) Compute all of the materials and labor variances.

(b) Compute the total overhead variance.

(a) Total Materials Variance:

Materials Price Variance:

Total Materials Variance:

Total Labor Variance:

*9,700 x 2

Labor Price Variance:

Labor Quantity Variance:

(b) Total Overhead Variance:

Fortes 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.

The company has reported the following actual results for the product for April:

Required:

a. Compute the materials price variance for April.

b. Compute the materials quantity variance for April.

c. Compute the labor rate variance for April.

d. Compute the labor efficiency variance for April.

e. Compute the variable overhead rate variance for April.

f. Compute the variable overhead efficiency variance for April.

(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)