Question

Fortes Inc. has provided the following data concerning one of the products in its standard cost system. Materials price variances is calculated on material purchased and materials quantity is based on Material used in production. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.

Inputs	Standard Quantity or Hours per Unit of Output			Standard Price or Rate
Direct materials		10.0	ounces	$	8.10	per ounce
Direct labor		0.5	hours	$	24.70	per hour
Variable manufacturing overhead		0.50	hours	$	6.40	per hour

The company has reported the following actual results for the product for April:

Actual output		7600	units
Raw materials purchased		50,200	ounces
Actual cost of raw materials purchased	$	386,210
Raw materials used in production		76,030	ounces
Actual direct labor-hours		3450	hours
Actual direct labor cost	$	88,880
Actual variable overhead cost	$	21,295

Required:

Enter all numbers as positive and rounded to the nearest dollar
Materials price variance	$
Materials quantity variance	$
Labor rate variance	$
Labor efficiency variance	$
Variable overhead rate variance	$
Variable overhead efficiency variance	$

Answer 1

	1)
	Direct Material
		Quantity	Rate	Amount
	Standard per unit	10	8.10	81.00
	Standard 7600 units	76000	8.10	615600.00
	Actual 7600 units	76030	7.70	585431.00
[Actual Rate of Raw Material Purchased: Actual Cost of raw material / Raw Material Purchased
		= $386210/50200 Ounces
		= $7.70	(Round off)
	Direct Labor
		Hours	Rate	Amount
	Standard per unit	0.50	24.70	12.35
	Standard 7600 units	3800	24.70	93860.00
	Actual 7600 units	3450	25.76	88880.00
	Variable Manufacturing Overhead
		Hours	Rate	Amount
	Standard per unit	0.5	6.40	3.20
	Standard 7600 units	3800	6.40	24320.00
	Actual 7600 units	3450	6.17	21295.00
	Material Price Variance
	It measures change in total cost on account of change in material cost per unit
	= Actual quantity ( Actual Rate - Standard rate)
	= 76030 (7.70 - 8.10)
	= 30412	Favorable
	Material Quantity Variance
	It measures change in total cost on account of change in material quantity used
	= Standard Rate ( Actual Quantity - Standard Quantity)
	= 8.10 ( 76030 - 76000 )
	= 243	Unfavorable
	Labor Rate Variance
	It measures change in total cost on account of change in Labor cost per hour
	= Actual Hours ( Actual Rate - Standard rate)
	= 3450 ( 25.76- 24.70)
	= 3657	Unfavorable
	Labor efficiency Variance
	It measures change in total cost on account of change in Labor hours used
	= Standard Rate ( Actual Hours - Standard Hours)
	= 24.70 ( 3450 - 3800 )
	= 8645	Favorable
	similarly, rest of the variances will be calculated with the given formula:
	Variable Overhead Rate Variance
	= Actual Hours (Actual Rate - Standard Rate)
	Variable Overhead Efficiency Variance.
	= Standard Rate ( Actual Hours - Standard Hours)