Henry Company has established the following standards for the costs of one unit of its product. The standard production overhead costs per unit are based on direct-labor hours. Calculation for standard per unit cost is as follows: Std Cost Std Qty Std Price/Rate Direct Material $ 14.40 6.00 kg $ 2.40/kg Direct Labor $ 3.00 0.40 hour $ 7.50/hour Variable Overhead $ 4.00 0.40 hour $ 10.00/hour Fixed Overhead* $ 4.80 0.40 hour $ 12.00/hour Total $ 26.20 *based on practical capacity of 2,500 direct-labor hour per month During December 2020, Henry purchased 30,000 kg of direct material at a total cost of $75,000. The total wages for December were $20,000, 75% of which were for direct labor. Henry manufactured 4,500 units of product during December 2020, using 28,000kg of the direct material purchased in December and 2,100 direct-labor hours. Actual variable and fixed overhead cost were $23,100 and $25,000, respectively. The scheduled production for the month was 5,000 units. Required: Calculate the following variances for December 2020, indicate whether each is favorable or unfavorable, and provide brief explanation of possible reasons for the related variances The direct-labor rate variance The direct-labor efficiency variance The Variable Overhead spending variance
Henry Company has established the following standards for the costs of one unit of its product. The standard production
|
Std Cost |
Std Qty |
Std Price/Rate |
|
|
Direct Material |
$ 14.40 |
6.00 kg |
$ 2.40/kg |
|
Direct Labor |
$ 3.00 |
0.40 hour |
$ 7.50/hour |
|
Variable Overhead |
$ 4.00 |
0.40 hour |
$ 10.00/hour |
|
Fixed Overhead* |
$ 4.80 |
0.40 hour |
$ 12.00/hour |
|
Total |
$ 26.20 |
|
|
*based on practical capacity of 2,500 direct-labor hour per month
During December 2020, Henry purchased 30,000 kg of direct material at a total cost of $75,000. The total wages for December were $20,000, 75% of which were for direct labor. Henry manufactured 4,500 units of product during December 2020, using 28,000kg of the direct material purchased in December and 2,100 direct-labor hours. Actual variable and fixed overhead cost were $23,100 and $25,000, respectively. The scheduled production for the month was 5,000 units.
Required:
Calculate the following variances for December 2020, indicate whether each is favorable or unfavorable, and provide brief explanation of possible reasons for the related variances
- The direct-labor rate variance
- The direct-labor efficiency variance
- The Variable Overhead spending variance
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