Direct materials Direct labor Variable overhead Standard Quantity or Hours 2.70 ounces 0.20 hours 0.20 hours c. Compute the labor efficiency variance. d. Compute the labor rate variance. e. Compute the variable overhead efficiency variance. Standard Price or Rate $ 7.00 per ounce $ 17.00 per hour $6.00 per hour In July the company produced 5,200 units using 14,450 ounces of the direct material and 1,070 direct labor-hours. During the month the company purchased 15,600 ounces of the direct material at a price of $7.2 per ounce. The actual direct labor rate was $16.2 per hour and the actual variable overhead rate was $5.4 per hour. The materials price variance is computed when materials are purchased. Variable overhead is applied on the basis of direct labor-hours. Required: a. Compute the materials quantity variance. b. Compute the materials price variance.
Direct materials Direct labor Variable overhead Standard Quantity or Hours 2.70 ounces 0.20 hours 0.20 hours c. Compute the labor efficiency variance. d. Compute the labor rate variance. e. Compute the variable overhead efficiency variance. Standard Price or Rate $ 7.00 per ounce $ 17.00 per hour $6.00 per hour In July the company produced 5,200 units using 14,450 ounces of the direct material and 1,070 direct labor-hours. During the month the company purchased 15,600 ounces of the direct material at a price of $7.2 per ounce. The actual direct labor rate was $16.2 per hour and the actual variable overhead rate was $5.4 per hour. The materials price variance is computed when materials are purchased. Variable overhead is applied on the basis of direct labor-hours. Required: a. Compute the materials quantity variance. b. Compute the materials price variance.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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Transcribed Image Text:Doby Corporation makes a product with the following standard costs:
Direct materials
Direct labor
Variable overhead
e. Compute the variable overhead efficiency variance.
f. Compute the variable overhead rate variance.
In July the company produced 5,200 units using 14,450 ounces of the direct material and 1,070 direct labor-hours. During the month
the company purchased 15,600 ounces of the direct material at a price of $7.2 per ounce. The actual direct labor rate was $16.2 per
hour and the actual variable overhead rate was $5.4 per hour. The materials price variance is computed when materials are
purchased. Variable overhead is applied on the basis of direct labor-hours.
Required:
a. Compute the materials quantity variance.
b. Compute the materials price variance.
c. Compute the labor efficiency variance.
d. Compute the labor rate variance.
Standard Quantity or Hours
2.70 ounces
0.20 hours
0.20 hours
a. Materials quantity variance
b. Materials price variance
c. Labor efficiency variance
d. Labor rate variance
Standard Price or Rate
$7.00 per ounce
$ 17.00 per hour
$ 6.00 per hour
Note: Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero
variance). Input all amounts as positive values.
e. Variable overhead efficiency variance
f. Variable overhead rate variance
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