Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 59

Variance Computations with Missing Data

The following information is provided to assist you in evaluating the performance of the production operations of Studio Company:

Units produced (actual)	42,000
Master production budget
Direct materials	$132,000
Direct labor	112,000
Overhead	159,200
Standard costs per unit
Direct materials	$1.65 × 2 gallons per unit of output
Direct labor	$14 per hour × 0.2 hour per unit
Variable overhead	$11.90 per direct labor-hour
Actual costs
Direct materials purchased and used	$150,960 (81,600 gallons)
Direct labor	111,708 (8,560 hours)
Overhead	163,200 (61% is variable)

Variable overhead is applied on the basis of direct labor-hours.

Required

Prepare a report that shows all variable production cost price and efficiency variances and fixed production cost price and production volume variances.

Step 1 of 9

Standard direct material cost is $1.65 per gallon and per unit of output the standard quantity of material required is 2 gallons.

Direct material price variance is the difference between actual direct material cost and the standard cost of actual quantity used. The actual direct material cost incurred is $150,960. The actual quantity used for production is 81,600 gallons. The standard cost per gallon is $1.65.