Chapter 15, Problem 15.19P

Problem 15.19

LO 4. 5

Calculate variable cost variances-explain results The standards for one case of Springfever Tonic are as follows:

Direct materials	4 lb @ $5.00/lb	= $20
Direct labor	3 hr @ $13.00/Ib	= $39
Variable overhead (based on direct labor hours)	3 hr @ $6.00/Ib	= $18

During the week ended August 28, the following activity took place:

7,400 lb of raw materials were purchased for inventory at a cost of $4.95 per pound.

2,000 cases of finished product were produced.

8,300 lb of raw materials were used.

5,800 direct labor hours were worked at a total cost of $78,300.

$35,670 of actual variable overhead costs were incurred.

Required:

Calculate each of the following variances and provide plausible explanations for the results:

1. Price variance for raw materials purchased.
2. Raw materials usage variance.
3. Direct labor rate variance.
4. Direct labor efficiency variance.
5. Variable overhead spending variance.
6. Variable overhead efficiency variance.