Material and Labor variance Analysis. The following data
pertain to the first week of Bima Sakti, Co’s operation during
June :
Material:
Actual purchase ………….…….. 1,500 units at $3.80 per unit
Actual usage …………………..….. 1,350 units
Standard usage …………………… 1,020 units at $ 4.00 per unit
Direct Labor:
Actual hours ……………………………..
Standard hours ……….………………..
310 hours at $ 12.30
340 hours at $ 12.00
Required: Compute the following variance, indicating whether
each one is favorable or unfavorable:
(1). Material purchase price variances, price usage variance,
and quantity variance .
(2). Labor rate and efficiency variance.
Answer:
(1).
Quantity x Unit cost = Amount
Actual materials purchased 1,500
$3,80 actual
$5,700
Actual materials purchased 1,500
4,00 standard 6,000
Material purchased price
Variance ………………….. 1,500
$(0.20)
$ (300) fav
Actual materials used
Actual materials used
Material price usage
Variance …………………..
Actual material used
Standard quantity allowed
Material quantity Variance
Quantity x Unit cost = Amount
1,350
$3,80 actual
$5,130
1,350
4,00 standard 5,400
1,350
$(0.20)
Quantity x Unit cost =
1, 350
$4,00 standard
1,020
4,00 standard
330
$4,00 standard
$ (270) fav
Amount
$5,400
$4,080
$1,320 unfav
(2).
Actual labor hours worked
Actual labor hours worked
Labor rate variance
Hours
310
310
310
Hours
Actual labor hours worked
310
Standard labor hours allowed 340
Labor efficiency Variance
(30)
x
Rate
= Amount
$12,20 actual
$3,782
$12,00 standard 3,720
$ 0.20
$62 unfav.
x
Rate
=
$12.00 standard
$12.00 standard
$12.00 standard
Amount
$3,720
$4,080
($360) fav.
Factory Overhead Variance Analysis, TWO-VARIANCE METHOD.
The normal capacity of 4 Sekawan Company’s Assembly
Department is 12,000 machine hours per month. At normal
capacity, the standard factory overhead rate is $ 12.50 per
machine hour, base on $ 96,000 of budgeted fixed cost per
month and a variable cost rate of $4.50 per machine hour.
During April, the department operated at 12,500 machine
hours, with actual factory overhead $ 166,000. The number of
standard machine hours allowed for the production actually
attained is $ 11,000.
Required: Compute the overall factory overhead variance and
then break the overall variance down into the controllable
variance and the volume variance. Indicate whether the
variances are favorable or unfavorable.
Answer :
Actual factory overhead …………..………………. $ 166,000
Standard overhead chargeable to actual production
(11,000 standard hours allowed x $ 12.50 overhead rate)
$ 137,500
Overall factory overhead variance ……………… $ 28,500 unfav.
Actual factory overhead …………………………… $ 166,000
Budget allowance based on standard hours allowed:
Variable overhead (11,000 standard machine hours
Allowed x $4.50 variable overhead rate) $ 49,500
Fixed overhead budgeted …………………….
Controllable variance ………………………….
$96,000
$ 145,500
$ 20,500
Budget allowance based on standard hours allowed
From above …………………………………….
$ 145,500
Standard factory overhead chargeable to production
(11,000 standard hours allowed x $ 12.50 overhead
Rate ………………………………………………..
$ 137,500
Volume variance …………………………………
$ 8,000unfav.
Controllable variance …………………… $ 20,500 unfav.
Volume variance ………………………….
8,000 unfav.
Overall factory overhead variance …. 28,500 unfav.