Homework SourseAnton Company manufactures wooden magazine stands An account
Anton Company manufactures wooden magazine stands. An accountant for Anton just completed the variance report for the current month. After printing the report, his computer’s hard drive crashed, effectively destroying most of the actual results for the month. All that the accountant remembers is that actual production was 220 stands and that all materials purchased were used in production. The following information is also available.
Required:
Using the budget for the current month and the variance report, construct the following items.
a. What was the actual purchase price per square foot of wood? (Round your answer to 2 decimal places.)
b. How many labor hours did it actually take to produce each stand? (Round your answer to 2 decimal places.)
c. What was the actual wage rate paid per hour? (Round your answer to 2 decimal places.)
d. What was actual total overhead for the month?
| Current Month: Budgeted Amounts | |||
| Budgeted production: 200 magazine stands | |||
| Direct materials: Wood | |||
| Usage | 3 | square feet per stand | |
| Price | $ | 0.25 | per square foot |
| Direct labor: | |||
| Usage | 0.5 | hours per stand | |
| Rate | $ | 10 | per hour |
| Variable overhead (allocated based on direct labor hours): | |||
| Rate per labor hour | $ | 4 | |
| Rate per stand | $ | 2 | |
| Fixed overhead (allocated based on direct labor hours): | |||
| Rate per labor hour | $ | 6 | |
| Rate per stand | $ | 3 | |
| Current Month: Variances | |||
| Direct materials price variance | $ | 33 | Unfavorable |
| Direct materials quantity variance | -0- | ||
| Direct labor rate variance | $ | 231 | Favorable |
| Direct labor efficiency variance | $ | 550 | Unfavorable |
| Overhead volume variance | $ | 60 | Favorable |
| Overhead spending variance | $ | 210 | Unfavorable |
Solution
Material Price Variance = Actual Quantity x (Actual Price – Standard Price)
33 = 660* x (Actual Price – 0.25)
(Actual Price – 0.25) = 33/660 = 0.05
Actual Price = 0.05+0.25 = $0.30 per SQF
*Actual quantity is same as standard quantity since quantity variance is 0(220 stands x 3SQF = 660SQF)
Direct labor efficiency variance = (Actual hours – standard hours) x Standard Rate
550 = (Actual Hours – 110) x 10
(Actual Hours – 110) = 550/10 = 55
Actual Hours = 55+110 = 165 hours
*Standard hours = 220 x 0.5 hours per stand = 110 hours
Direct Labor rate variance = Actual hours x (Standard Rate – Actual Rate)
231 = 165 x (10 – Actual rate)
(10 – Actual rate) = 231/165 = 1.4
Actual rate = 10-1.4 = $8.6 per hour
Overhead spending variance = Actual overhead – Budgeted Overhead
210 = Actual Overhead – (6 x 200 x 0.5)
Actual Overhead = 210+600 = 810
