Question

Rip Tide Company manufactures surfboards. Its standard cost information follows: Standard Quantity 15 sq. ft. 10 hrs. Standard Price (Rate) $5 per sq. ft. $15 per hr. Standard Unit Cost $ 75.00 150.89 Direct materials (fiberglass) Direct labor Variable manufacturing overhead (based on direct labor hours) Fixed manufacturing overhead ($24,600 + 300 units) 10 hrs. $ 6 per hr. 60.00 80.00 Rip Tide has the following actual results for the month of June 323 Number of units produced and sold Number of square feet of fiberglass used Cost of fiberglass used Number of labor hours worked Direct labor cost Variable overhead cost Fixed overhead cost 5.03 $27,665 3,170 $49,769 $14,699 $25,150 Required: 1. Calculate the direct materials price, quantity, and total spending variances for Rip Tide. 2. Calculate the direct labor rate, efficiency, and total spending variances for Rip Tide. 3. Calculate the variable overhead rate, efficiency, and total spending variances for Rip Tide 4. Calculate the fixed overhead spending (budget) and volume variances for Rip Tide.

Answer 1

Requirement-1:

Direct material price variance Direct material quantity variance Direct material spending variance 2515 925 3440 U U U

Explanation:

Direct Material Price Variance Actual quantity x 5030 x Standard price 5.00 - - Actual price 5.50 ) = ) = DM Price variance 2515 U Direct Material Quantity Variance Standard price x Standard quantity 5.00 x 4845 - Actual quantity 5030 )= )= DM quantity variance 925 U

Requirement-2:

Direct labor rate variance Direct labor efficiency variance Direct labor spending variance 2219 U 900 FT 1319 U

Explanation:

Direct Labor Rate Variance Actual hours x 3170 x Standard rate 15.00 Actual rate 15.70 DL Rate variance 2219 U - )= Direct Labor efficiency Variance Standard ratex Standard hours- 15.00 3230 Actual hours 3170 ) = | DL Efficiency variance )= 900 F

Requirement-3:

Variable overhead rate variance Variable overhead efficiency variance Variable overhead spending variance 4330 360 4690 F F F

Explanation:

VOH rate Variance Actual hours 3170 x )= Standard rate 6.00 Actual rate 4.63 VOH Rate variance 4330 VOH efficiency Variance Standard rate 6.00 x X Standard hours 3230 - Actual hours 3170 ) = ) = VOH efficiency variance 360 | F |

Requirement-4:

Fixed overhead Spending variance Fixed overhead volume variance 1150 1840 F F

Explanation:

FOH volume variance Absorbed FOH (80 x 323) - Budgeted FOH 24000 = = FOH budget variance 1840 hudbet variance FOH Spending variance Actual FOH 25150 Budgeted FOH 24000 = = FOH budget variance 1150