Coronado Construction Consultants performs cement core tests in its Greenville laboratory. The following standard costs for the tests have been developed by the company’s controller, Landon Coronado, based on performing 2,100 core tests per month. Standard Price Standard Quantity Standard Cost Direct materials $0.50 per pound 5 pounds $2.50 Direct labor $10 per DLH 0.50 DLH 5.00 Variable overhead $9 per DLH 0.50 DLH 4.50 Fixed overhead $16 per DLH 0.50 DLH 8.00 Total standard cost per test $20.00 At the end of March, London reported the following operational results: ● The company actually performed 2,260 core tests during the month. ● 8,500 pounds of direct materials were purchased during the month at a total cost of $5,700. ● 6,400 pounds of direct materials were used to conduct the core tests. ● 830 direct labor hours were worked at a total cost of $9,780. ● Actual variable overhead was $7,700. ● Actual fixed overhead was $15,900.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Coronado Construction Consultants performs cement core tests in its Greenville laboratory. The following standard costs for the tests have been developed by the company’s controller, Landon Coronado, based on performing 2,100 core tests per month.
| Standard Price | Standard Quantity | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
Direct materials
|
$0.50 per pound | 5 pounds | $2.50 | |||||||
|
Direct labor
|
$10 per DLH | 0.50 DLH | 5.00 | |||||||
|
Variable
|
$9 per DLH | 0.50 DLH | 4.50 | |||||||
|
Fixed overhead
|
$16 per DLH | 0.50 DLH | 8.00 | |||||||
|
Total standard cost per test
|
$20.00 |
| At the end of March, London reported the following operational results: | |||
| ● | The company actually performed 2,260 core tests during the month. | ||
| ● | 8,500 pounds of direct materials were purchased during the month at a total cost of $5,700. | ||
| ● | 6,400 pounds of direct materials were used to conduct the core tests. | ||
| ● | 830 direct labor hours were worked at a total cost of $9,780. | ||
| ● | Actual variable overhead was $7,700. | ||
| ● | Actual fixed overhead was $15,900. |
(a) Calculate the direct materials price variance for March. (Round per unit value to 2 decimal places, e.g. 52.75 and final answer to 0 decimal places, e.g. 5,275. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
| Direct materials price variance | $enter the direct materials price variance in dollars | select an option |
(b) Calculate the direct materials quantity variance for March. (Round answer to 0 decimal places, e.g. 5,275. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
| Direct materials quantity variance | $enter the direct materials quantity variance in dollars | select an option |
(c) Calculate the direct labor rate variance for March. (Round per unit value to 2 decimal places, e.g. 52.75 and final answer to 0 decimal places, e.g. 5,275. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
| Direct labor rate variance | $enter the direct labor rate variance in dollars | select an option |
(d) Calculate the direct labor efficiency variance for March. (Round answer to 0 decimal places, e.g. 5,275. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
| Direct labor efficiency variance | $enter the direct labor efficiency variance in dollars | select an option |
(e) Calculate the variable overhead spending variance for March. (Round per unit value to 2 decimal places, e.g. 52.75 and final answer to 0 decimal places, e.g. 5,275. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
| Variable overhead spending variance | $enter the variable overhead spending variance in dollars | select an option |
(f) Calculate the variable overhead efficiency variance for March. (Round answer to 0 decimal places, e.g. 5,275. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
| Variable overhead efficiency variance | $enter the variable overhead efficiency variance in dollars | select an option |
(g) Calculate the fixed overhead spending variance for March. (Round per unit value to 2 decimal places, e.g. 52.75 and final answer to 0 decimal places, e.g. 5,275. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
| Fixed overhead spending variance | $enter the fixed overhead spending variance in dollars | select an option |
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