For each variance, determine the amount and circle the correct direction,

F = favorable, U = unfavorable

a. Material price variance. F U

b. Material use variance. F U

c. Direct labor rate variance. F U

d. Direct labor efficiency variance. F U

e. Variable overhead budget variance. F U

f. Variable overhead efficiency variance. F U

SOLUTION:

a. MPV $14,210 F $80,890 - ($3 x 31,700)

b. MUV $ 300 U ($3 x 31,600) - ($15 x 6,300)

c. DLRV $ 5,090 U $252,330 - ($14 x 17,660)

d. DLEV $17,360 F ($14 x 17,660) - ($42 x 6,300)

e. VOHBV $ 1,700 U $178,300 - ($10 x 17,660)

f. VOHEV $11,160 U ($9 x 17,660) - ($27 x 6,300)

6. Toimi Inc. had the following variances for the most recent month:

Materials Price Variance $3,500 U

Materials Usage Variance $ 720 F
Direct Labor Rate Variance $5,770 F
Direct Labor Efficiency Variance $6,980 U

Other information included: actual wages paid $72,310; materials purchased $130,760; standards per unit were 2 labor hours at $5 per hour,
3 pounds at $6 per pound. There were no changes in materials inventories.

a. Find the units produced.

b. Find the standard labor hours.

c. Find the actual labor hours.

d. Find the standard quantity of materials allowed.

e. Find the actual quantity of materials used.

SOLUTION:

a. 7,110 units ($72,310 + 5,770 - 6,980) / (2 x $5)

b. 14,220 SH $71,100 / $5

c. 15,616 AH $78,080 / $5

d. 21,330 lbs ($130,760 - 3,500 + 720) / $6

e. 21,210 lbs $127,260 / $6

7. Ralph Inc. had the following variances for the most recent month:

Direct Labor Rate Variance $14,560 U

Direct Labor Efficiency Variance $ 3,660 U
Variable Overhead Spending Variance $12,320 F
 Other information included: actual wages paid $105,560; materials purchased $124,860; standards per unit were 2 labor hours at $5 per
hour and variable overhead at $6 per hour.

a. Find the units produced.

b. Find the standard labor hours.

c. Find the actual labor hours.

d. Find the variable overhead efficiency variance.

e. Find the actual variable overhead.

SOLUTION:

a. 8,734 units ($105,560 - 14,560 - 3,660) / (2 x $5)

b. 17,468 SH 8,734 x 2

c. 18,200 AH ($105,560 - 14,560) / $5

d. $4,392 U (18,200 - 17,468) x 6

e. $96,880 (18,200 x $6) - $12,320

8. Gros Ventre Company expects a learning rate of 80%. The first batch of a new product is expected to take 500 direct labor hours.

a. Compute the cumulative average time for the first four batches.

b. Compute the total time for the first four batches.

SOLUTION:

a. 320 [500 hours x 80% x 80%]

b. 1,280
Output (X) Average time (Y) Total time (XY)
1 500 500
2 400 (500 x 80%) 800 (2 x 400)
4 320 (400 x 80%) 1,280 (4 x 320)

9. Benco Inc. has the following results for December when production was 8,000 units:

Materials purchased 18,000 pounds $213,520

Materials used 17,750 pounds
Direct labor 27,050 hours $436,544

Per unit standards are 2.5 pounds of materials at $12.00 per pound and 3.5 hours at $16 per hour.

For each variance, determine the amount and circle the correct direction,

F = favorable, U = unfavorable

a. Material price variance. F U

b. Material use variance. F U

c. Direct labor rate variance. F U

d. Direct labor efficiency variance. F U

SOLUTION:

a. MPV $ 2,480 F $213,520 - ($12 x 18,000)

b. MUV $27,000 F ($12 x 17,750) - ($12 x 2.5 x 8,000)

c. DLRV $ 3,744 U $436,544 - ($16 x 27,050)

d. DLEV $15,200 F ($16 x 27,050) - ($16 x 3.5 x 8,000)

10. Cascade Company expects a learning rate of 90%. The first batch of a new product is expected to take 200 direct labor hours.

a. Compute the cumulative average time for the first eight batches.

b. Compute the total time for the first eight batches.

SOLUTION:

a. 145.8 (200 hours x 90% x 90% x 90%)

b. 1,166.4
Output (X) Average time (Y) Total time (XY)
1 200 200
2 180 (200 x 90%) 360 (2 x 180)
4 162 (180 x 90%) 648 (4 x 162)
8 145.8 (162 x 90%) 1,166.4 (8 x 145.8)