Question

Whispering Corporation manufactures a single product. The standard cost per unit of product is shown below.

Direct materials—1 pound plastic at $7.00 per pound		$ 7.00
Direct labor—2.5 hours at $11.80 per hour		29.50
Variable manufacturing overhead		17.50
Fixed manufacturing overhead		17.50
Total standard cost per unit		$71.50

The predetermined manufacturing overhead rate is $14.00 per direct labor hour ($35.00 ÷ 2.5). It was computed from a master manufacturing overhead budget based on normal production of 13,250 direct labor hours (5,300 units) for the month. The master budget showed total variable costs of $92,750 ($7.00 per hour) and total fixed overhead costs of $92,750 ($7.00 per hour). Actual costs for October in producing 3,900 units were as follows.

Direct materials (4,030 pounds)		$ 28,613
Direct labor (9,600 hours)		116,160
Variable overhead		103,738
Fixed overhead		34,862
Total manufacturing costs		$283,373

The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.

(a)

Compute all of the materials and labor variances.

Total materials variance		$		Neither favorable nor unfavorable, Unfavorable, Favorable
Materials price variance		$		UnfavorableFavorableNeither favorable nor unfavorable
Materials quantity variance		$		UnfavorableFavorableNeither favorable nor unfavorable
Total labor variance		$		FavorableNeither favorable nor unfavorableUnfavorable
Labor price variance		$		Neither favorable nor unfavorableUnfavorableFavorable
Labor quantity variance		$		UnfavorableFavorableNeither favorable nor unfavorable

(b)

Compute the total overhead variance.

Total overhead variance

$

Neither favorable nor unfavorable, Favorable, Unfavorable

Answer 1

3900 X 1.00= SQ = 3900 Particulars SQ SP AQ АР Direct Material 3900 7 4030 7.1 Material Price Variance (MPV) = (SP - AP ) AQ Total Material variance (TMV) = (SQ * SP ) - (AQ * AP) *7.1) 3900 7 = ( 4030 ) -(4030 >MPV 7 7.1 »TMV Unfavorable >TMV Unfavorable >>MPV -403.00 -1313 Material Quantity Variance (MQV) = (SQ - AQ ) SP >>MQV * = ( 3900 4030 7 -910.00 Unfavorable >MQV Note -1 SQ = Standard Quantity for Actual output SP Standard Price per Raw material AQ Actual Quantiity consumed AP Actual Price per Raw material

3900 X SH = 2.50 = 9750 Particulars SH SR АНР AR Direct Labour 12.10 9750 11.8 9600 Labour Price Variance (LPV) = (SR - AR ) AHP 11.8 >LPV 12.1 9600 Unfavorable >LPV -2880 Total Labour variance ( TLV) = SH * SR - AHP * AR Labour Quantity Variance (LQV) = ( SH - AHW) SR * 12 (9750 12 - >>LQV >TLV 9750 9600 11.8 9600 = Favorable Unfavorable >LQV 1770 -1110 >TLV = Note -1 SH Standard Hours per Actual Output SR = Standard Rate per Hour AHP = Actual Hours Paid AR Actual Rate per Hour.