Question

Tharaldson Corporation makes a product with the following standard costs: 

	Standard		Standard
	Quantity or	Standard Price or	Cost Per
	Hours	Rate	Unit
Direct materials	5.7 ounces	$2.00 per ounce	$11.40
Direct labor	0.8 hours	$11.00 per hour	$8.80
Variable overhead	0.8 hours	$6.00 per hour	$4.80

The company reported the following results concerning this product in June.

Originally budgeted output	3,900 units
Actual output	3,500 units
Raw materials used in production	20,700 ounces
Purchases of raw materials	21,800 ounces
Actual direct labor-hours	6,000 hours
Actual cost of raw materials purchases	$42,600
Actual direct labor cost	$13,900
Actual variable overhead cost	$3,950

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. 

The materials price variance for June is:

2.

Milar Corporation makes a product with the following standard costs: 

	Standard Quantity or Hours	Standard Price or Rate
Direct materials	9.5 pounds	$9.00 per pound
Direct labor	0.8 hours	$31.00 per hour
Variable overhead	0.8 hours	$14.50 per hour

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. In January the company produced 3,420 units using 13,680 pounds of the direct material and 2,856 direct labor-hours. During the month, the company purchased 14,440 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $88,125 and the actual variable overhead cost was $39,700. 

The labor rate variance for January is:

Kartman Corporation makes a product with the following standard costs: 

	Standard Quantity or Hours	Standard Price or Rate	Standard Cost Per Unit
Direct materials	7.6 pounds	$8.10 per pound	$61.56
Direct labor	0.6 hours	$35.00 per hour	$21.00
Variable overhead	0.6 hours	$5.10 per hour	$3.06

In June the company's budgeted production was 4,500 units but the actual production was 4,600 units. The company used 23,250 pounds of the direct material and 2,400 direct labor-hours to produce this output. During the month, the company purchased 26,500 pounds of the direct material at a cost of $181,180. The actual direct labor cost was $58,121 and the actual variable overhead cost was $11,661. 

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. 

The variable overhead rate variance for June is:

Answer 1

1. Materials Price Variance = (SP-AP) * AQ = (2 - 42,600/21,800) * 21,800 = (2-1.95) * 21,800 = 1000 Favourable