Chapter 15, Problem 15.20P

Problem 15.20

LO 4. 5

Calculate variable cost variances-explain results The standards for one case of liquid weed killer are as follows:

Direct materials	5 lb @ $ 6.80/lb
Direct labor	2.4 hr @ $14.00/hr
Variable overhead (based on machine hours)	1.5 hr @ $ 4.50/hr

During the week ended May 6, the following activity took place:

2,910 machine hours were worked.

11,400 lb of raw material were purchased for inventory at a total cost of $80,940.

1,900 cases of finished product were produced.

9,260 lb of raw material were used.

4,420 labor hours were worked at an average rate of $14.35 P^er hour.

$12,513 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.