[moonkhan209]

computation of materials, labor, and overhead variances; and overhead variance report

I have to Compute the direct materials cost variance, including its price and quantity variances
According to the following question, I calculated the price variance which is = (46500x5.20)-(46500x5)=9300 but confused about quantity varience.I came up with =(46500x5)-(20000x3x5)=67500.butthe quantity varience is wrong,I don't know and confused what Please let me know what mistake I am making. Thanks
Kwikeze Company set the following standard costs for one unit of its product.

Direct materials ((3.0 Ibs. @ $5.0 per Ib.) $ 15.00
Direct labor (1.9 hrs. @ $10.0 per hr.) 19.00
Overhead (1.9 hrs. @ $18.50 per hr.) 35.15

Total standard cost $ 69.15


The predetermined overhead rate ($18.50 per direct labor hour) is based on an expected volume of 75% of the factory's capacity of 20,000 units per month. Following are the company's budgeted overhead costs per month at the 75% level.


Overhead Budget (75% Capacity)
Variable overhead costs
Indirect materials $ 30,000
Indirect labor 75,000
Power 30,000
Repairs and maintenance 30,000

Total variable overhead costs $ 165,000
Fixed overhead costs
Depreciation—building 25,000
Depreciation—machinery 72,000
Taxes and insurance 18,000
Supervision 247,250


Total fixed overhead costs 362,250


Total overhead costs $ 527,250




The company incurred the following actual costs when it operated at 75% of capacity in October.


Direct materials (46,500 Ibs. @ $5.20 per lb.) $ 241,800
Direct labor (28,000 hrs. @ $10.30 per hr.) 288,400
Overhead costs
Indirect materials $ 46,000
Indirect labor 176,500
Power 34,500
Repairs and maintenance 34,500
Depreciation—building 25,000
Depreciation—machinery 97,200
Taxes and insurance 16,200
Supervision 247,250 677,150

Total costs $ 1,207,350

[Just Looking]

The quantity variance formula is:
(actual quantity used x standard price) - (standard quantiy allowed x standard price)

You are on the right track. Your only mistake is that you are using 20,000 which is the number of units. However, each unit requires 3 pounds of material in your standard calculation.

[moonkhan209]

Yeah, But I am multiplying this 20000 with 3 to get the standard quantity and than multiplied it with standard price which is 5. You think I am right?

[Just Looking]

Sorry - somehow I missed that 3 in your equation. The only problem I see is that you show it as 67,500 not -67,500.