1.
Fausto Company employs a standard cost system in which direct materials inventory is carried
at standard cost. The company has established the following standard for the materials costs of
one unit of product:
Standard
Quantity
4 pounds
Standard
Price
$ 7.50/pound
Standard
Cost
$30.00
During June, the company purchased 166,100 pounds of direct material at a total cost of
$1,362,020. The company manufactured 34,600 units of product during June using 140,450
pounds of direct materials. The price variance for the direct materials acquired by the company
during June is (Do not round intermediate calculations.):
$98,315 favorable.
$116,270 favorable.
$116,270 unfavorable.
$98,315 unfavorable.
First, determine the actual price per unit of materials as follows.
Total cost of $1,362,020 ÷ total pounds of 166,100 = $8.20 per pound.
Then, the price variance for the direct material acquired by the company is determined as
follows.
Materials price variance = AQ × (AP − SP).
Materials price variance = 166,100 × ($8.20 − $7.50) = $116,270 (U).
2.
Fausto Company employs a standard cost system in which direct materials inventory is carried
at standard cost. The company has established the following standard for the materials costs of
one unit of product:
Standard
Quantity
3 pounds
Standard
Price
$ 7.8/pound
Standard
Cost
$23.4
During June, the company purchased 166,700 pounds of direct material at a total cost of
$1,466,960. The company manufactured 47,200 units of product during June using 143,950
pounds of direct materials. The direct material quantity variance for June is:
$18,330 unfavorable.
$20,680 favorable.
$18,330 favorable.
$20,680 unfavorable.
First, determine the standard quantity allowed as follows.
Total units of 47,200 units × standard quantity of 3 pounds per unit = 141,600 pounds.
Then, the direct material quantity variance is determined as follows.
Materials quantity variance = SP × (AQ – SQ).
Materials quantity variance = $7.80 × (143,950 – 141,600) = $18,330 (U).
3.
Mochel Company employs a standard cost system in which direct materials inventory is carried
at standard cost. The company has established the following standard for the direct labor costs
of one unit of product:
Standard
Hours
1.80 hours
Standard
Rate
$19.40/hour
Standard
Cost
$34.92
The total factory wages for June were $900,000, 80 percent of which were for direct labor. The
company manufactured 20,600 units of product during June using 36,000 direct labor hours. The
direct labor rate variance for June is (Do not round intermediate calculations.):
$201,600 unfavorable.
$201,600 favorable.
$21,600 unfavorable.
$21,600 favorable.
First, calculate the actual rate per hour of direct labor as follows.
Total factory wages of $720,000 (or $900,000 × .80) ÷ total direct labor hours of 36,000 = $20.00
per hour.
Then, the direct labor rate price variance is determined as follows.
Labor rate variance = AH × (AR – SR).
Labor rate variance = 36,000 × ($20.00 – $19.40) = $21,600 (U).
4.
Houghton Company maintains warehouses that stock items carried by its e-retailer clients.
When one of Houghton's clients receives an order from an online customer, the order is
forwarded to Houghton. Houghton then pulls the item from the warehouse, packs it and ships it
to the customer. Houghton uses a predetermined variable overhead rate based on direct laborhours. According to the company's records, .08 direct labor-hours are required to fulfill an order
for one item and the variable overhead rate is $6.85 per direct-labor hour. During July,
Houghton shipped 320,000 orders using 25,100 direct labor-hours. The company incurred a total
of $166,915 in variable overhead costs. The variable overhead rate variance during July was (Do
not round intermediate calculations.):
$5,020 unfavorable.
$3,425 unfavorable.
$5,020 favorable.
$3,425 favorable.
The variable overhead (VOH) rate variance during July is determined as follows.
VOH rate variance = AH (AR – SR).
VOH rate variance = 25,100 hours ($6.65 per hour – $6.85 per hour) = $5,020 (F).
5.
Houghton Company maintains warehouses that stock items carried by its e-retailer clients.
When one of Houghton's clients receives an order from an online customer, the order is
forwarded to Houghton. Houghton then pulls the item from the warehouse, packs it and ships it
to the customer. Houghton uses a predetermined variable overhead rate based on direct laborhours. According to the company's records, .08 direct labor-hours are required to fulfill an order
for one item and the variable overhead rate is $6.25 per direct-labor hour. During July,
Houghton shipped 290,000 orders using 23,000 direct labor-hours. The company incurred a total
of $141,450 in variable overhead costs. The variable overhead efficiency variance during July
was:
$2,300 unfavorable.
$1,250 favorable.
$2,300 favorable.
$1,250 unfavorable.
The variable overhead (VOH) efficiency variance during July is determined as follows.
VOH efficiency variance = SR (AH – SH).
VOH efficiency variance = $6.25 per hour (23,000 hours – 23,200 hours) = $1,250 (F).
6.
Mirenda Company applies manufacturing overhead costs to products on the basis of direct
labor-hours. The standard cost card shows that 12.00 direct labor-hours are required per unit of
product. For August, the company budgeted to work 376,000 direct labor-hours and to incur the
following total manufacturing overhead costs:
Total fixed overhead costs
Total variable overhead costs
$616,640
436,000
During August, the company completed 28,800 units of product, worked 348,480 direct laborhours, and incurred the following total manufacturing overhead costs:
Total fixed overhead costs
Total variable overhead costs
$574,990
430,800
The denominator activity in the predetermined overhead rate is 376,000 direct labor-hours. The
fixed overhead budget variance for August is:
$49,856 U.
$49,856 F.
$41,650 U.
$41,650 F.
Compute the fixed overhead (FOH) budget variance as follows.
FOH budget variance = Actual fixed overhead – Budgeted fixed overhead.
FOH budget variance = $574,990 – $616,640 = $41,650 F.
Since actual fixed overhead was less than the amount budgeted for the period, the budget variance is
favorable.
7.
Mirenda Company applies manufacturing overhead costs to products on the basis of direct
labor-hours. The standard cost card shows that 12.30 direct labor-hours are required per unit of
product. For August, the company budgeted to work 363,000 direct labor-hours and to incur the
following total manufacturing overhead costs:
Total fixed overhead costs
Total variable overhead costs
$500,940
403,500
During August, the company completed 28,150 units of product, worked 349,060 direct laborhours, and incurred the following total manufacturing overhead costs:
Total fixed overhead costs
Total variable overhead costs
$485,190
402,200
The denominator activity in the predetermined overhead rate is 363,000 direct labor-hours. The
fixed overhead volume variance for August is (Do not round intermediate calculations.):
$19,237 U.
$14,195 U.
$3,885 F.
$23,122 U.
First, compute the fixed overhead (FOH) rate as follows.
FOH rate = Budgeted fixed overhead costs ÷ budgeted direct labor hours.
FOH rate = $500,940 ÷ 363,000 direct labor hours = $1.38 per direct labor hour.
Then, compute the FOH volume variance as follows.
FOH volume variance = Budgeted fixed overhead – (Standard hours allowed × FOH rate).
FOH volume variance = $500,940 – ((28,150 units × 12.30) × $1.38) = $23,122 U.
Since budgeted fixed overhead was more than the amount applied to work in process during the
period, the volume variance is unfavorable.