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Paver Products operates a small plant in New Mexico that produces dog food in batches of 1,500 pounds. The product sells for $6.00 per pound. Standard costs for 2018 are: Standard direct labor cost = $15 per hour Standard direct labor hours per batch = 10 hours Standard price of material A = $0.35 per pound Standard pounds of material A per batch = 839 pounds Standard price of material B = $0.55 per pound Standard pounds of material B per batch = 250 pounds Fixed overhead cost per batch = $510 At the start of 2018, the company estimated monthly production and sales of 51 batches. The company estimated that all overhead costs were fixed and amounted to $25,000 per month. During the month of June 2018 (typically a somewhat slow month), 40 batches were produced (not an unusual level of production for June). The following costs were incurred: Direct labor costs were $8,440 for 460 hours. 36,100 pounds of material A costing $9,025 were purchased and used. 13,100 pounds of material B costing $5,895 were purchased and used. Fixed overhead of $21,200 was incurred.
	Calculate variances for material, labor, and overhead. (Round intermediate calculations to 2 decimal places, e.g. 1.62 and final answers to 0 decimal places, e.g. 125. Enter all variances as a positive number.) Material Price Variance (Material A) $
Material Price Variance (Material B)		$
Material Quantity Variance (Material A)		$
Material Quantity Variance (Material B)		$
Labor Rate Variance		$
Labor Efficiency Variance		$
Controllable Overhead Variance		$
Overhead Volume Variance		$
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	Prepare a summary of the variances. (Enter unfavorable variances using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Material Price Variance (Material A) $ Material Price Variance (Material B) Material Quantity Variance (Material A) Material Quantity Variance (Material B) Labor Rate Variance Labor Efficiency Variance Controllable Overhead Variance Overhead Volume Variance Total $ Link to Text Link to Text
	Your answer is incorrect. Try again. Does the unfavorable overhead volume variance suggest that overhead costs are out of control? The overhead volume variance
that overhead costs are out of control. Link to Text Link to Text

Solution

Material price variance (Material B) = Std. cost for actual qty - Actual cost
= $0.55 * 13100 pounds - $5895
= $1310 F

Material qty variance (Mat. A) = (Std Qty for actual production - Acutal qty) * Std. price
= (40 batches * 839 pound - 36100 pounds) * $0.35 per pound
= (33560 pounds - 36100 pounds) * 0.35
= $889 U

Material qty variance (Mat. B) = (Std Qty for actual production - Acutal qty) * Std. price
= (40 batches * 250 pounds - 13100 pounds) * $0.55 per pound
= (10000 pounds - 13100 pounds) * $0.55
= $1705 U

Labour rate variance = Std labour cost for acutal hrs - Actual labour cost
= ($15 * 460 hrs) - $8440
= $1540 U

Labour efficiency variance = (Std hrs for acutal production - Actual hrs) * Std rate
= (40 batches* 10hrs - 460 hrs ) * $15
= $900 U

Controllable overhead variance = Actual overhead expense - (budgeted overhead per unit x standard number of units)
= $21200 - ($510 * 51)
= $21200 - $26010 = $4810 U

Overhead volume variance = Absorbed fixed overhead - Budgeted fixed overhead
= ($510 * 40 batches ) - ($510 * 51batches)
= $5610 U

Absorbed fixed overhead = Std overhead rate per unit * Actual units

Does the unfavorable overhead volume variance suggest that overhead costs are out of control?
No, it is not , it is only showing that the variance occured is negative due changes in units.