Emotional Rescue Company produces many products for household use. Company sells products to storekeepers as well as to customers. Detergent-DX is one of the products of Emotional Rescue. It is a cleaning product that is produced, packed in large boxes and then sold to customers and storekeepers. Emotional Rescue uses a traditional standard costing system to control costs and has established the following materials, labor and overhead standards to produce one box of Detergent-DX: Direct materials; 1.5 pounds @ $12 per pound: $18.00 Direct labor; 0.6 hours $24 per hour: $14.40 Variable manufacturing overhead; 0.6 hours @ $5.00: $3.00 During August 2012, company produced and sold 3,000 boxes of Detergent-DX. 8,000 pounds of direct materials were purchased @ $11.50 per pound. Out of these 8,000 pounds, 6,000 pounds were used during August. There was no inventory at the beginning of August. 1600 direct labor hours were recorded during the month at a cost of $40,000. The variable manufacturing overhead costs during August totaled $7,200 Required: 1. Compute materials price variance and materials quantity variance. (Assume that the materials price variance is computed at the time of purchase.) 2. Compute direct labor rate variance and direct labor efficiency variance 3. Compute variable overhead spending variance and variable overhead efficiency variance

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Compute materials price variance and materials quantity variance. (Assume that the materials price variance is computed at the time of purchase.)
Compute direct labor rate varianceand direct labor efficiency variance.
Compute variable overhead spending varianceand variable overhead efficiency variance.

Emotional Rescue Company produces many products for household use. Company sells
products to storekeepers as well as to customers. Detergent-DX is one of the products of
Emotional Rescue. It is a cleaning product that is produced, packed in large boxes and then
sold to customers and storekeepers.
Emotional Rescue uses a traditional standard costing system to control costs and has
established the following materials, labor and overhead standards to produce one box of
Detergent-DX:
Direct materials; 1.5 pounds @ $12 per pound: $18.00
Direct labor; 0.6 hours $24 per hour: $14.40
Variable manufacturing overhead; 0.6 hours @ $5.00: $3.00
During August 2012, company produced and sold 3,000 boxes of Detergent-DX. 8,000
pounds of direct materials were purchased @ $11.50 per pound. Out of these 8,000
pounds, 6,000 pounds were used during August. There was no inventory at the beginning of
August. 1600 direct labor hours were recorded during the month at a cost of $40,000. The
variable manufacturing overhead costs during August totaled $7,200
Required:
1. Compute materials price variance and materials quantity variance. (Assume that the
materials price variance is computed at the time of purchase.)
2. Compute direct labor rate variance and direct labor efficiency variance
3. Compute variable overhead spending variance and variable overhead efficiency
variance

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