Question

Black and Decker Corporation has the following information is for their standard and actual costs:

Standard Costs:

Budgeted units of production - 9,000 (100% of capacity)

Standard material per unit - 12 lbs.

Standard material cost - $14.00 per pound

Standard labor hours per unit - 12

Standard labor rate - $29.00 per hour

Standard variable overhead rate - $7.50 per labor hour

Budgeted fixed overhead - $729,000

Fixed overhead rate is based on budgeted labor hours at 100% capacity

Actual Costs:

Actual Production - 8,400 units

Actual material purchased and used - 87,360 pounds

Actual total material cost - $1,222,350

Actual labor - 101,200 hours

Actual total labor costs - $2,884,200

Actual fixed overhead - $756,250

Actual variable overhead - $715,000

Determine: (a) the quantity, price variance, and total direct materials cost variance; (b) the time variance, rate variance, and total direct labor cost variance; and (c) the volume variance, controllable variance, and total factory overhead cost variance.

Answer 1

Solution a:

Direct Material Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AQ *	AP =				AQ *	SP =				SQ *	SP =
87360	$13.99	$1,222,350.00			87360	$14.00	$1,223,040.00			100800	$14.00	$1,411,200.00
			$690.00	F				$188,160.00	F
			Direct Material Price Variance					Direct Material Qty variance
Direct material price variance					$690.00	F
Direct material quantity variance					$188,160.00	F
Direct material cost variance					$188,850.00	F

Solution b:

Direct Labor Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
101200	$28.50	$2,884,200.00			101200	$29.00	$2,934,800.00			100800	$29.00	$2,923,200.00
			$50,600.00	F				$11,600.00	U
			Direct Labor rate Variance					Direct Labor Efficiency Variance
Direct Labor Rate variance					$50,600.00	F
Direct Labor Efficiency variance					$11,600.00	U
Direct labor cost variance					$39,000.00	F

Solution c:

Controllable Variance
Actual overhead	$1,471,250.00
Budgeted overhead	$1,485,000.00
Controllable variance	$13,750.00	F

Fixed overhead volume variance
Budgeted fixed overhead	$729,000.00
Fixed overhead cost applied	$680,400.00
Fixed overhead volume variance	$48,600.00	U

Total factory overhead cost variance = $13,750 F + $48,600 U = $34,850 U