Macro Company has developed the following standards for one of its products.

(10 marks)

Cost card for One Unit of Product

Materials: 30 square feet × Rs 5 per square foot Rs. 150.00

Direct labor: 16 hours × Rs 7 per hour Rs. 112.00
Variable manufacturing overhead: 16 hours × Rs 5 per hour Rs. 80.00
Total standard variable cost per unit Rs. 342.00

The following activity occurred during the month of April:

Materials consumed: 74,000 sq. feet at Rs 5.30 per sq. foot
Units produced: 2,500 units
Direct labor: 42,000 hours at Rs 6.70 per hour
Actual variable manufacturing overhead: Rs.228,000

Required: (for total quantity produced)

a. Calculate the direct materials price variance.
b. Calculate the direct materials usage variance.
c. Calculate the direct labor rate variance.
d. Calculate the direct labor efficiency variance.
e. Calculate the variable overhead spending variance.
f. Calculate the variable overhead efficiency variance.

Solution:

a. Direct Material price Variance = AQ*(SP – AP)

Direct Material Price Variance = 74000*(5-5.30)
Direct Material Price Variance = 74000*(-0.30)
Direct Material Price Variance = -$22,200

b. Direct Material Usage Variance = AP * (SQ – AQ)

Direct Material Usage Variance = 5 * (30*2500 – 74000)
Direct Material Usage Variance = 5 * (75000 – 74000)
Direct Material Usage Variance = 5 * (1000)
Direct Material Usage Variance = $ 5,000

c. Direct Labor Rate Variance = AH * (SR – AR)

Direct Labor Rate Variance = 42000 * (7 – 6.70)
Direct Labor Rate Variance = 42000 * (1.70)
Direct Labor Rate Variance = $71,400

d. Direct Labor Effeciency Variance = SR * (SH - AH)

Direct Labor Effeciency Variance = 7 * (16*2500 – 42000)
Direct Labor Effeciency Variance = 7 * (40000-42000)
Direct Labor Effeciency Variance = - $14,000

e. Variable overhead spending variance = AH*(SR – AR)

Variable overhead spending variance = 42000* (5 - 228,000/42000)
Variable overhead spending variance = 42000*-0.428571429
Variable overhead spending variance = - $18000

This study source was downloaded by 100000850196141 from CourseHero.com on 12-15-2022 02:38:31 GMT -06:00

https://www.coursehero.com/file/86562493/B66C2-CM-17B-Model-Answerdocx/
 f. Variable overhead efficiency variance = SR*(SH - AH)
Variable overhead efficiency variance = 5*(42000 – 16*2500)
Variable overhead efficiency variance = 5*(40000-42000)
Variable overhead efficiency variance = + $10000

This study source was downloaded by 100000850196141 from CourseHero.com on 12-15-2022 02:38:31 GMT -06:00

https://www.coursehero.com/file/86562493/B66C2-CM-17B-Model-Answerdocx/
Powered by TCPDF (www.tcpdf.org)