Wonderful Not only ald our salespeople do a good Job In meet

Wonderful Not only ald our salespeople do a good Job In meeting the sales budget this year, but our production people dld a good ob in controlling costs ss well.ald Kim Clark, president of Martell Company. \"Our $34,700 overa manufacturing cost varlance oniy 1.0% of the S3 70.000 stanard coat of products made during the year. That\'s wel within the 3% parameter get by management for scceptsble varances. It look like everyone will be In line for a bonus thls year The company produces end sels single product. The tandard cost card for the product folows: (21 antity Inpata 514.35 18.00 4.50 9.00 545.85 .8 ho 2.0Par The following 5dchtional Informations ???18 le for the year Just competes: a. The company manufsctured 25,000 units of product during the yesr b. A total of 85,000 feet of materlial waa purchased during the yesr st a cost of $450 per foat Al ofthla msteral was used to manufocturetne 25,000 unts producea. There were no ?eginning or endng im entres for the year c. The company worked 46,500 direct lsbar-hours during the year st s direct labor cost of $9.70 per hour. d. Overneso 5ppled to products n tne ??|& of standro direct l5bor-hours. Dst3 resting to manufacturing overnes costs folow. 42.000 5210,000 5206,000 Required: 1. Compute the materiala price and quantity varisnces for the yesr 2 Compute the labor rate and efficency varlances for tihe yesr 3. For manufecturing overhend compute: a. The varisble overhesd rate and efficlency varances for the year. b. The fixed avernesd budget and volume varisnces forthe year. (For all requirements, Indicate the effect of each variance by selecting ?\" for favorable, \"U\" for unfavorable, and \"None\" for no effect (Le., zero varlance). Input all amounts as postive values. Meters price verilence Meter squenaty varance Labor endency veriance Fbeed ovemesd budget verisnce Fbred ovemesd valume

Solution

Solution 1:

Standard quantity of material for actual production = 25000*3.50 = 87500 feet

Actual quantity of material = 85000 feet

Standard price of material = $4.10 per feet

Actual price of material = $4.50 per feet

Material price variance = (SP - AP) * AQ = ($4.10 - $4.50) * 85000 = $34,000 U

Material quantity variance = (SQ - AQ) * SR = (87500 - 85000) * $4.10 = $10,250 F

Solution 2:

Standard hours of direct labor = 25000 * 1.80 = 45000 hours

Standard rate of direct labor = $10 per hour

Actual hours of direct labor = 46500 hours

Actual rate of direct labor = $9.70 per hour

Direct labor rate variance = (SR - AR) * AH = ($10 - $9.70) * 46500 = $13,950 F

Direct labor efficiency variance = (SH - AH) * SR = (45000 - 46500) * $10 = $15,000 U

Solution 3a:

Standard hours of direct labor = 25000 * 1.80 = 45000 hours

Standard rate of variable overhead = $2.50 per hour

Actual hours of direct labor = 46500 hours

Actual rate of variable overhead = $120,900 / 46500 = $2.60 per hour

Variable overhead rate variance = (SR - AR) * AH = ($2.50 - $2.60) * 46500 = $4,650 U

Variable overhead efficiency variance = (SH - AH) * SR = (45000 - 46500) * $2.50 = $3,750 U

Solution 3b:

Budgeted fixed overhead = $210,000

Actual fixed overhead = $206,000

Fixed overhead applied = SH * SR = 45000 * ($210,000 / 42000) = $225,000

Fixed overhead budget variance = Budgeted fixed overhead - Actual fixed overhead = $210,000 - $206,000 = $4,000 F

Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead = $225,000 - $210,000 = $15,000 F