Working Backward from Variances
On May 1, 20XX, Bovar Company began the manufacture of a new mechanical device known as "Dandy." The company installed a standard cost system in accounting for manufacturing costs. The standard costs for a unit of "Dandy" are as follows:
Raw materials (6lbs. @ $1 per lb.) $6.00 Direct Labor (1 hour @ $4 per hour) $4.00 Overhead (75% of direct labor costs) $3.00 Total $13.00
The following data were obtained from Bovar's records for the month of May:
Units Actual production of "Dandy" 4,000 Units sold of "Dandy" 2,500
Debit Credit Sales $50,000 Purchases (26,000 pounds) $27,300 Material price variance 1,300 Material quantity variance 1,000 Direct Labor rate variance 760 Direct labor usage variance 800
The amount shown above for material price variance is applicable to raw material purchased during May.
Compute each of the following items for Bovar for the month of May. Show computations in good form.
(a) Standard quantity of raw materials allowed (in pounds)
(b) Actual quantity of raw materials used (in pounds)
(c) Standard hours allowed.
(d) Actual hours worked.
(e) Actual direct labor rate.
Working Backward from Variances
On May 1, 20XX, Bovar Company began the manufacture of a new mechanical device known as "Dandy." The company installed a standard cost system in accounting for manufacturing costs. The standard costs for a unit of "Dandy" are as follows:
| Raw materials (6lbs. @ $1 per lb.) | $6.00 |
| Direct Labor (1 hour @ $4 per hour) | $4.00 |
| Overhead (75% of direct labor costs) | $3.00 |
| Total | $13.00 |
The following data were obtained from Bovar's records for the month of May:
| Units | |
| Actual production of "Dandy" | 4,000 |
| Units sold of "Dandy" | 2,500 |
| Debit | Credit | |
| Sales | $50,000 | |
| Purchases (26,000 pounds) | $27,300 | |
| Material price variance | 1,300 | |
| Material quantity variance | 1,000 | |
| Direct Labor rate variance | 760 | |
| Direct labor usage variance | 800 |
The amount shown above for material price variance is applicable to raw material purchased during May.
Compute each of the following items for Bovar for the month of May. Show computations in good form.
(a) Standard quantity of raw materials allowed (in pounds)
(b) Actual quantity of raw materials used (in pounds)
(c) Standard hours allowed.
(d) Actual hours worked.
(e) Actual direct labor rate.
Related questions
The standards for one case of liquidweed killer are:
| Direct materials | 3lbs. @ $ 6.00/lb. | |
| Direct labor | 1.8hrs. @ $12.00/hr. | |
| Variable overhead (based on machine hours) | 0.6hrs. @ $ 3.50/hr. | |
During the week ended August 6, thefollowing activity took place: |
| 2,390 machinehours were worked. |
11,400 lbs. of raw material werepurchased for inventory at a total cost of $70,680. |
| 3,800 cases offinished product were produced. |
| 11,290 lbs. ofraw material were used. |
| 6,720 laborhours were worked at an average rate of $12.25 per hour. |
| $8,126 actualvariable overhead costs were incurred. |
| Required: |
Calculate each of the followingvariances (Inputall amounts as positive values. Do not round intermediatecalculations. Indicate the effect of each variance by selecting "F"for favorable, "U" for unfavorable, and "None" for no effect (i.e.,zero variance). Omit the "$" sign in yourresponse): |
| a. | Price variance for raw materials purchased. | $ | ||
| b. | Rawmaterials usage variance. | $ | ||
| c. | Direct labor rate variance. | $ | ||
| d. | Direct labor efficiency variance. | $ | ||
| e. | Variable overhead spending variance. | $ | ||
| f. | Variable overhead efficiency variance. | $ | ||
Tharaldson Corporation makes a product with the following standard costs:
| Standard Quantity or Hours | Standard Price or Rate | Standard Cost per Unit | |
| Direct material | 6.6 ounces | $ 5.00 per ounce | $33.00 |
| Direct labor | 0.8 hours | $ 10.00 per hour | $8.00 |
| Variable overhead | 0.8 hours | $ 5.00 per hour | $4.00 |
The company reported the following results concerning this product in June.
| Originally budgeted output | 2,000 units |
| Actual output | 2,500 units |
| Raw materials used in production | 19,000 ounces |
| Purchases of raw materials | 21,500 ounces |
| Actual direct labor-hours | 4,900 hours |
| Actual cost of raw materials purchases | $40,500 |
| Actual direct labor cost | $12,000 |
| Actual variable overhead cost | $3,000 |
The company applies variable overhead on the basis of direct labor hours. The direct material purchases variance is computed when the materials are purchased .
The materials quantity variance for June is:
