Question

Drain Water Disposal Company has a long-term contract with several large cities to collect garbage and trash from residential customers. To facilitate the collection, Drain places a large plastic container with each household. Several years ago, the company decided to manufacture its own containers as a cost-saving measure. To help ensure cost efficiency, a standard cost system was Installed in the plant. The following standards have been established for the product's variable inputs.

Answer 1

1. Material Variance:

a.

(1)	(2)	(3)
SQSP	AQSP	AQAP
(6,000*12) * 3.5 =252,000	69,000* 3.5 = 241,500	69000* 3.55 =244,950

SQ= 6000*12 = 72,000

(i). Material Price Variance (2-3) = 241,500 - 244,950 = $3,450 (A)

(ii). Material Usuage Variance(1-2) = 252,000 - 241,500 = $10,500 (F)

(iii). Material Cost Variance (1-3) = 252,000 - 244,950 = $7050 (F)

2. Labour Variance:

(1)	(2)	(3)
SRSH	SRAH	ARAH
(6000*1.70) * 11 =10,200*11 = 112,200	10,800* 11 =118,800	$118,800

(i). Direct Labor Price (2-3) = 118,800 - 118,800 = 0

(ii). Direct Quantity Variance (1-2) = 112,200 - 118,800 = $6,600 (A)

(iii). Direct Cost Variance (1-3) = 112,200 - 118,800 = $6,600 (A)

3. Total overhead Variance -

Total Actual Cost - Total Standard Cost

= Total Actual Cost = Total Actual Fixed Overhead + Total Actual Variable Overhead  

= $29,700 + $27,000 = $56,700

Total Standard Cost = Total Applied Variable Overhead + Total Applied Fixed Overhead

= $30,600 + $20,400 = $51,000

Total Overhead Variance = $56,700 - $51,000 = $5,700