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Pure Corporation Makes a Product with the Following Standard Costs

Question 149

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Pure Corporation makes a product with the following standard costs:
 Standard  Standard Quantity or  Standard Price or  Cost Pet  Inputs  Hours RateUnit Direct materials4.3pounds$6.00per pound $25.80Direct labor 0.7hours$20.00per hour $14.00Variable overhead0.7hours$2.00 per hour$1.40\begin{array}{lccc}&&&\text { Standard }\\&\text { Standard Quantity or } & \text { Standard Price or } & \text { Cost Pet }\\\text{ Inputs } & \text{ Hours } & \text{Rate} & \text{Unit }\\\text{Direct materials} & 4.3\text{pounds} & \$ 6.00 \text{per pound }& \$ 25.80 \\\text{Direct labor }& 0.7\text{hours} & \$ 20.00 \text{per hour }& \$ 14.00 \\\text{Variable overhead} & 0.7\text{hours} & \$ 2.00\text{ per hour} & \$ 1.40 \end{array}

The company reported the following results concerning this product in September.
 Originally budgeted output 1,900 units  Actual output 1,700 units  Raw materials used in production 7,210 pounds  Purchases of raw materials 7,600 pounds  Actual direct labor-hours 1,260 hours  Actual cost of raw materials purchases $43,320 Actual direct labor cost $25,578 Actual variable overhead cost $2,394\begin{array}{lr}\text { Originally budgeted output } & 1,900 \text { units } \\\text { Actual output } & 1,700 \text { units } \\\text { Raw materials used in production } & 7,210 \text { pounds } \\\text { Purchases of raw materials } & 7,600 \text { pounds } \\\text { Actual direct labor-hours } & 1,260 \text { hours } \\\text { Actual cost of raw materials purchases } & \$ 43,320 \\\text { Actual direct labor cost } & \$ 25,578 \\\text { Actual variable overhead cost } & \$ 2,394\end{array}

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
Required:
a. Compute the materials quantity variance.
b. Compute the materials price variance.
c. Compute the labor efficiency variance.
d. Compute the direct labor rate variance.
e. Compute the variable overhead efficiency variance.
f. Compute the variable overhead rate variance.

Correct Answer:

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a.Materials quantity variance = SP(AQ - ...

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