
1
Material price variance
The difference between the actual amount that a company spends on direct materials and the standard amount that was budgeted to be spent is material price variance.
Material quantity variance
The difference between actual amount of materials that a company uses in production process and amount that was budgeted to be used is material quantity variance.
To compute:Favorable or unfavorable material price and quantity variance.
2
Labor rate variance
The difference between the actual amount paid to workers by a company and the amount that was budgeted to be paid is labor rate variance.
Labor efficiency variance
The difference between the value of actual labor hours used in production and the value of hours that were budgeted to be used is labor efficiency variance.
To compute: Favorable or unfavorable labor rate and efficiency variances.
3
Variable overhead rate variance
The difference between actual amount of variable manufacturing
Variable overhead efficiency variance
The difference between the value of actual variable overhead based on actual time taken to produce a product and standard variable overhead based on time that was expected to be used is variable overhead efficiency variance.
To compute: Favorable or unfavorable variable overhead rate and efficiency variances.

Want to see the full answer?
Check out a sample textbook solution
Chapter 9 Solutions
GEN COMBO LOOSELEAF INTRODUCTION TO MANAGERIAL ACCOUNTING; CONNECT AC
- Ivanhoe, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a home for fires and gas leaks and then transmit this information to a smartphone. The cost structure to manufacture 20,400 Tri-Robos is as follows. Cost Direct materials ($51 per robot) $1,040,400 Direct labor ($39 per robot) 795,600 Variable overhead ($7 per robot) 142,800 Allocated fixed overhead ($29 per robot) 591,600 Total $2,570,400 Ivanhoe is approached by Tienh Inc., which offers to make Tri-Robo for $116 per unit or $2,366,400. Following are independent assumptions. Assume that none of the fixed overhead can be avoided. However, if the robots are purchased from Tienh Inc., Ivanhoe can use the released productive resources to generate additional income of $375,000. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Direct materials Direct labor Variable overhead Fixed overhead Opportunity cost Purchase price Totals Make…arrow_forwardcorrect answer pleasearrow_forwardcost accountingarrow_forward
- Summit Holdings has $280,000 in accounts receivable that will be collected within 70 days. The company needs cash urgently and decides to factor them, receiving $260,000. Skyline Factoring Company, which took the receivables, collected $275,000 after 85 days. Find the rate of return on this investment for Skyline.arrow_forwardwhat are the variable expenses per unit?arrow_forwardprice-earning ratio accounting questionarrow_forward
- Bright Electronics has a Computer Division with the following financial details: • Sales: $250,000 • Cost of Goods Sold: $120,000 Operating Expenses: $50,000 Average Invested Assets: $1,200,000 ⚫ Hurdle Rate: 12%arrow_forwardA business has a dividend payout ratio of 0.6, an expected growth rate of 4% per year, and investors require a 9% return on their investment. What should be the price-earnings ratio? a. 10x b. 12x c. 15x d. 6xarrow_forwardcomplete the journal entryarrow_forward
- Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage LearningExcel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning

