Epley Corporation makes a product with the following standar

Epley Corporation makes a product with the following standard costs: Standard Quantity or Hours Direct materlals Direct labor Varlable overhead 2.0 pounds 1.7 hours 1.7 hours 100 p poun $13.00 per hour $700 per hour In July the company produced 4,700 units using 10,350 pounds of the direct material and 2,330 direct labor- hours. During the month, the company purchased 10,920 pounds of the direct material at a cost of $76,800 The actual direct labor cost was $38,245 and the actual varlable overhead cost was $11,946 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases varlance Is computed when the materials are purchased. The materlals quantity varlance for July Is: O $220 u O $360 F O $6,650 U O $220 F

Solution

1). Direct Material Qty variance = (Std qty for actual production - Actual Qty) * Standard Rate
= (4700 units * 2 pounds - 10350 pounds) * $7 per pound
= (9400 - 10350 ) * $7
= 6650 U

2). Direct Material price variance = (Std rate - Actual rate ) * Actual qty purchased
= ( $5.25 per pound - $2.8 per pound) * 10700 pounds
= $2.45 * 10700
= 26215 F
Acutual rate = $29960 / 10700 = $2.8 per pound

3). Variable overhead efficiency variance = (Std. hrs for actual production - Actual hrs) * Std overhead rate per hour
= (4300 units * 0.9 hrs - 4120 hrs ) * $4
= (3870 - 4120) * $4
= 1000 U.