of Flubber 080 hours of direct labor hours Variable overhead

of Flubber 0.80 hours of direct labor hours. Variable overhead oosts during October lotaled $4,200

Solution

Solution 1a:

Standard quantity of material for actual production = 4000*2.2 = 8800 Ounce

Actual quantity of material purcahse= 12000 ounce

Actual quantity of material used = 12000 - 3100 = 8900 ounce

Standard price of material = $23 per ounce

Actual price of material = $259,800 / 12000 = $21.65

Material price variance = (SP - AP) * AQ purchased = ($23 - $21.65) * 12000 = $16,200 F

Material quantity variance = (SQ - AQ) * SR = (8800 - 8900) * $23 = $2,300 U

Solution 1b:

As price offered by supplier is lesser than standard cost resulting in to favorable material price variance, therefore company should sign the long term purchase contract.

Solution 2a:

Standard hours of direct labor = 4000 * 0.60 = 2400 hours

Standard rate of direct labor = $14 per hour

Actual hours of direct labor = 130*25 = 3250 hours

Actual rate of direct labor = $12 per hour

Direct labor rate variance = (SR - AR) * AH = ($14 - $12) * 3250 = $6,500 F

Direct labor efficiency variance = (SH - AH) * SR = (2400 - 3250) * $14 = $11,900 U

Solution 2b:

New labor mix resulted in favorable rate variance but due to non experienced staff, unfavorable efficiency variance is higher than favorable direct labor rate variance, therefore it is recommended that new labor mix should not be continued.

Solution 3:

Standard hours of direct labor = 4000 * 0.60 = 2400 hours

Standard rate of variable overhead = $2.50 per hour

Actual hours of direct labor = 130*25 = 3250 hours

Actual rate of variable overhead = $4,200 / 3250 = $1.2923077 per hour

Variable overhead rate variance = (SR - AR) * AH = ($2.50 - $1.2923077) * 3250 = $3,925 F

Variable overhead efficiency variance = (SH - AH) * SR = (2400 - 3250) * $2.50 = $2,125 U