The following data were drawn from the records of Kersten Corporation
| Planned volume for year (static budget) | 5,000 | units | |||||
| Standard direct materials cost per unit | 3.00 | lbs. | @ | $ | 1.80 | per pound | |
| Standard direct labor cost per unit | 3.80 | hours | @ | $ | 5.00 | per hour | |
| Total expected fixed overhead costs | $ | 20,000 | |||||
| Actual volume for the year (flexible budget) | 5,500 | units | |||||
| Actual direct materials cost per unit | 2.50 | lbs. | @ | $ | 2.20 | per pound | |
| Actual direct labor cost per unit | 4.20 | hrs. | @ | $ | 4.40 | per hour | |
| Total actual fixed overhead costs | $ | 16,300 | |||||
| Required: |
| a. | Prepare a materials variance information table showing the standard price, the actual price, the standard quantity, and the actual quantity. (Round “Standard price” and “Actual price” to 2 decimal places.) |
| b. | Calculate the materials price and usage variances. Indicate whether the variances are favorable (F) or unfavorable (U). (Select “None” if there is no effect (i.e., zero variance).) |
| c. | Prepare a labor variance information table showing the standard price, the actual price, the standard hours, and the actual hours. (Round “Standard price” and “Actual price” to 2 decimal places.) |
| d. | Calculate the labor price and usage variances. Indicate whether the variances are favorable (F) or unfavorable (U). (Select “None” if there is no effect (i.e., zero variance).) |
| e. | Calculate the predetermined overhead rate, assuming that Kersten uses the number of units as the allocation base. (Round your answer to 2 decimal place.) |
| f. | Calculate the fixed cost spending variance. Indicate whether the variance is favorable (F) or unfavorable (U). (Select “None” if there is no effect (i.e., zero variance).) |
Answer:
| A | |
| Material variance information statement | |
| Slandered price Per pond | 1.8 |
| Actual price Per pond | 2.2 |
| Standard Quantity for flexible Budget (5500*3 lbs)= 16500 |
16500 |
| Actual Quantity for flexible Budget (5500*2.5 lbs)= 13750 |
13750 |
Material Price Variance
= (Standard Price- − Actual Price) × Actual Quantity
=(1.8-2.2) *13750
=0.4*5500
=5500 U
Material Usage Variance
= (Actual usage – Standard usage) x Standard cost per unit
=(13750-16500) *2.2
=4950F
| C | |
| Labor variance information statement | |
| Standard price Per Hour | 5 |
| Actual price Per Hour | 4.4 |
| Standard Quantity for flexible Budget (5500*3.8 fr)= 20900 |
20900 |
| Actual Quantity for flexible Budget (5500*4.2)= 23100 |
23100 |
D
Labor Price Variance
= (Standard Price- − Actual Price) × Actual hour
=(5-4.4) *23100
=13860F
Labor Usage Variance
= (Actual hours – Standard hours) x Standard rate
=(23100-20900)*5
=2200*5
=11000 U
| E | |
| Fixed overhead information statement | |
| Standard | 20000 |
| Actual price | 16300 |
Fixed Overhead Volume Variance = Applied Fixed Overhead – Budgeted Fixed Overhead
= Applied Fixed Overhead = Standard Fixed Overhead Rate × Standard Hours Allowed
| Standard Fixed Overhead Rate = | Budgeted Fixed Overhead |
| Budgeted Units |
=20000/5000
=4
Applied Fixed Overhead = 5500 × $4
= $22,000
=22000-20000
=2000 U
