moonkhan209
Jul 17, 2011, 04:08 PM
Materials, labor, and overhead variances; and overhead variance report
Kegler Company has set the following standard costs per unit for the product it manufactures.
Direct materials (17 Ibs. @ $4 per Ib.)
$
68
Direct labor (4 hrs. @ $18 per hr.)
72
Overhead (4 hrs. @ $3.85 per hr.)
15.4
Total standard cost
$
155.4
The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 10,000 units per month. The following flexible budget information is available.
Operating Levels
70%
80%
90%
Production in units
7,000
8,000
9,000
Standard direct labor hours
28,000
32,000
36,000
Budgeted overhead
Variable overhead costs
Indirect materials
$
14,000
$
16,000
$
18,000
Indirect labor
20,300
23,200
26,100
Power
5,950
6,800
7,650
Maintenance
28,700
32,800
36,900
Total variable costs
68,950
78,800
88,650
Fixed overhead costs
Rent of factory building
15,000
15,000
15,000
Depreciation—Machinery
10,000
10,000
10,000
Supervisory salaries
19,400
19,400
19,400
Total fixed costs
44,400
44,400
44,400
Total overhead costs
$
113,350
$
123,200
$
133,050
During May, the company operated at 90% of capacity and produced 9,000 units, incurring the following actual costs.
Direct materials (140,000 Ibs. @ $3.8 per Ib.)
$
532,000
Direct labor (30,000 hrs. @ $16 per hr.)
480,000
Overhead costs
Indirect materials
$
16,000
Indirect labor
27,500
Power
7,650
Maintenance
3,800
Rent of factory building
15,000
Depreciation—Machinery
10,000
Supervisory salaries
24,000
103,950
Total costs
$
1,115,950
In this question, I have to Compute the direct materials variance, including its price and quantity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e. zero variance). Omit the "$" sign in your response.)
Price variance. The Price Variance is 28000 which I got by Multiplying 140000 by the difference of Acual cost and Standard cost. Now I can't find the Quantity Varience. I know that the standard price would be 4, but don't know what would be standard quantity so my answer about Quantity Varience should be equal to 52000. Would be very thankful, if anybody help to figureout this problem.
$
28,000 (2%)
F (2%)
Quantity variance
$
52,000 (2%)
F (2%)
Direct materials variance
$
80,000
Kegler Company has set the following standard costs per unit for the product it manufactures.
Direct materials (17 Ibs. @ $4 per Ib.)
$
68
Direct labor (4 hrs. @ $18 per hr.)
72
Overhead (4 hrs. @ $3.85 per hr.)
15.4
Total standard cost
$
155.4
The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 10,000 units per month. The following flexible budget information is available.
Operating Levels
70%
80%
90%
Production in units
7,000
8,000
9,000
Standard direct labor hours
28,000
32,000
36,000
Budgeted overhead
Variable overhead costs
Indirect materials
$
14,000
$
16,000
$
18,000
Indirect labor
20,300
23,200
26,100
Power
5,950
6,800
7,650
Maintenance
28,700
32,800
36,900
Total variable costs
68,950
78,800
88,650
Fixed overhead costs
Rent of factory building
15,000
15,000
15,000
Depreciation—Machinery
10,000
10,000
10,000
Supervisory salaries
19,400
19,400
19,400
Total fixed costs
44,400
44,400
44,400
Total overhead costs
$
113,350
$
123,200
$
133,050
During May, the company operated at 90% of capacity and produced 9,000 units, incurring the following actual costs.
Direct materials (140,000 Ibs. @ $3.8 per Ib.)
$
532,000
Direct labor (30,000 hrs. @ $16 per hr.)
480,000
Overhead costs
Indirect materials
$
16,000
Indirect labor
27,500
Power
7,650
Maintenance
3,800
Rent of factory building
15,000
Depreciation—Machinery
10,000
Supervisory salaries
24,000
103,950
Total costs
$
1,115,950
In this question, I have to Compute the direct materials variance, including its price and quantity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e. zero variance). Omit the "$" sign in your response.)
Price variance. The Price Variance is 28000 which I got by Multiplying 140000 by the difference of Acual cost and Standard cost. Now I can't find the Quantity Varience. I know that the standard price would be 4, but don't know what would be standard quantity so my answer about Quantity Varience should be equal to 52000. Would be very thankful, if anybody help to figureout this problem.
$
28,000 (2%)
F (2%)
Quantity variance
$
52,000 (2%)
F (2%)
Direct materials variance
$
80,000