Chapter 9, Problem 2AE

1

To determine

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

To determine

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

To determine

Variable overhead rate variance

The difference between actual amount of variable manufacturing overheads and amount that was budgeted for variable overheads is variable overhead rate variance.

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.