[koel26]

Lido Company's standard and actual costs per unit for the most recent period, during which 500 units were actually produced, are given below:

Standard Actual
Materials:
Standard: 2 feet at $1.50 per foot $ 3.00
Actual: 1.9 feet at $1.60 per foot $ 3.04
Direct labor:
Standard: 1.5 hours at $6.00 per hour 9.00
Actual: 1.7 hours at $6.30 per hour 10.71
Variable manufacturing overhead:
Standard: 1.5 hours at $3.40 per hour 5.10
Actual: 1.7 hours at $3.00 per hour 5.10
Total unit cost $17.10 $18.85

All of the material purchased during the period was used in production during the period.

Required:

From the foregoing information, compute the following variances. Indicate whether the variance is favorable (F) or unfavorable (U):
a. Material price variance.
b. Material quantity variance.
c. Direct labor rate variance.
d. Direct labor efficiency variance.
e. Variable overhead spending variance.
f. Variable overhead efficiency variance.

My ans are as follows: (a) .19 (unfav)
(b) .15 (fav)
(c) .51 (unfav)
(d) 1.2 (unfav)
(e) .68 (fav)
(f) .68 (unfav)

My confusion is with 500 units , what do I multiply that with?

[Just Looking]

Thank you for showing your work and asking a specific question. You computed the variance per unit, where you want to show the variances based on the 500 units produced - where we know that all materials purchased were used in production. For example, let's look at the material variance. We know it took 1.9 actual feet per unit, so to produce 500 units we needed 950 (1.9*500) feet.

material price variance = (Actual quantity purchased × Actual price) − (Actual quantity purchased × Standard price) = (500 x 1.9 x 1.60) - (500 x 1.9 x 1.50) = 95

I checked your variances and found that you had done them correctly per unit.

[koel26]

Thank you so much for your input, I will correct my error.

[amanda31]

Sorry to intrude on your question, but could I ask:

How do you determine whether a variance is adverse or favourable? My lecturer wasn't very clear.
Thanks in advance.

[Just Looking]

If you compare the actual to the standard and the actual is less, it is favorable. If the actual is more, it is unfavorable. If you think of it logically it will make sense. For example, the standard cost is $15 but the actual cost is $14. You saved a dollar which will mean you have a higher profit. That is favorable.

[amanda31]

Thank you so much. That's a huge help. Happy New Year to you also.