Montego Bay Community College

Variance Analysis Worksheet

Section A
Orient Company has developed the following standards for one of its products:

Direct materials 10 pounds x $8 per pound

Direct labor 6 hours x $20 per hour
Variable overhead 6 hours x $6 per hour

The following activities occurred during the month of November:

Materials purchased 8,000 pounds costing $70,000

Materials used 6,500 pounds
Units produced 600 units
Direct labor 4,200 hours costing $75,600
Actual variable overhead $26,400

The company records materials price variances at the time of purchase.

____ 1. Refer to Figure 9-7. Orient's materials price variance would be

a. $22,000 unfavorable
b. $18,000 unfavorable
c. $6,000 unfavorable
d. $4,000 unfavorable

____ 2. Refer to Figure 9-7. Orient's materials usage variance would be

a. $22,000 unfavorable
b. $12,000 favorable
c. $10,000 unfavorable
d. $4,000 unfavorable

____ 3. Refer to Figure 9-7. Orient's labor rate variance would be

a. $12,000 unfavorable
b. $12,000 favorable
c. $8,400 favorable
d. $3,600 unfavorable

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____ 4. Refer to Figure 9-7. Orient's labor efficiency variance would be
a. $12,000 unfavorable
b. $12,000 favorable
c. $8,400 favorable
d. $3,600 unfavorable

____ 5. Refer to Figure 9-7. Orient's variable overhead spending variance would be
a. $4,800 favorable
b. $4,800 unfavorable
c. $3,600 unfavorable
d. $1,200 unfavorable

____ 6. Refer to Figure 9-7. Orient's variable overhead efficiency variance would be

a. $1,200 unfavorable
b. $3,600 unfavorable
c. $4,800 unfavorable
d. $4,800 favorable

Section A
Question 1
Deines, Inc. manufactures one product called tybos. The company uses a standard cost system and sells
each tybo for $8. At the start of monthly production, Deines estimated 8,000 tybos would be produced
in March. Deines has established the following material and labor standards to produce one tybo:
Standard Quantity Standard Price
Direct materials 2.5 pounds $3 per pound
Direct labor 0.6 hours $10 per hour

During March 2009, the following activity was recorded by the company relating to the production of
tybos:

1. The company produced 7,500 units during the month.

2. A total of 20,000 pounds of materials were purchased at a cost of $55,000.
3. A total of 20,000 pounds of materials were used in production.
4. 4,000 hours of labor were incurred during the month at a total wage cost of $44,000.

Instructions
Calculate the following variances for March for Deines, Inc.
(a) Total material variance
(b) Materials price variance
(c) Materials quantity variance
(d) Total labour variance
(e) Labor price variance
(f) Labor quantity variance

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Question 2
Hite Company has developed the following standard costs for its product for 2009:
HITE COMPANY
Standard Cost Card
Product A
Cost Element Standard Quantity × Standard Price = Standard Cost
Direct materials 4 pounds $3 $12
Direct labor 3 hours 8 24
Manufacturing overhead 3 hours 4 12
$48
The company expected to produce 25,000 units of Product A in 2009 and work 75,000 direct labor
hours.

Actual results for 2009 are as follows:

• 26,000 units of Product A were produced.
• Actual direct labor costs were $630,800 for 76,000 direct labor hours worked.
• Actual direct materials purchased and used during the year cost $283,500 for 105,000 pounds.
Instructions
Compute the following variances showing all computations to support your answers. Indicate whether
the variances are favorable or unfavorable.
(a) Total Materials variance
(b) Materials usage variance.
(c) Direct materials price variance.
(d) Total direct labor variance.
(e) Direct labour efficiency variance.
(f) Direct labour rate variance

Question 3
Suppose that the variable production overhead cost of product X is as follows:

2 hours at $1.50 = $3 per unit

During period 6, 400 units of product X were made. The labour force worked 820 hours. The variable
overhead cost was $1,230.

Calculate the following variances:

(a) The variable overhead total variance

(c) The variable overhead efficiency variance

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Question 4
Suppose that a company budgets to produce 1,000 units of product E during August. The expected time
to produce a unit of E is five hours, and the budgeted fixed production overhead is $20,000. The
standard fixed production overhead cost per unit of product E will therefore be 5 hours at $4 per hour
(=$20 per unit). Actual fixed production overhead expenditure in August turns out to be$20,450. The
labour force manages to produce 1,100 units of product E in 5,400 hours of work.

Calculate the fixed production total variance and its subvariances.

Question 5
You have been asked to examine the performance of a subsidiary company for May 2011. The
subsidiary supplies kitchen units to the building industry. The standard cost of one unit for May was as
follows:
$
Direct material 5 kilos at $4 per kilo 20
Direct labour 4 hours at $6 per hour 24
Variable overheads (based upon an overhead absorption rate of $2 per dir lab hr) 8
Fixed overheads (based upon an absorption rate of $4 per dir lab hr) 16
68

Budgeted output in May was 1,200 units

The actual results were as follows:

• 1,300 units were made
• Direct material used was 6,600 kilos at a total cost of $25,080
• Direct labour was 5,330 hours at a cost of $32,513
• Actual variable overheads were $13,325
• Actual fixed overheads were $22,000

Calculate the following:

a. Material total variance

b. Material price variance
c. Material usage variance
d. Labour total variance
e. Labour rate variance
f. Labour efficiency variance
g. Variable overhead total variance
h. Variable overhead expenditure variance
i. Variable overhead efficiency variance
j. Fixed overhead total variance
k. Fixed overhead expenditure variance
l. Fixed overhead volume variance
m. Fixed overhead volume efficiency variance
n. Fixed overhead volume capacity variance

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Question 5

Vernon Manufacturing has developed the following standards for one of its products:

STANDARD VARIABLE COST CARD

ONE UNIT OF PRODUCT

Direct materials: 20 square feet x $5 per square foot $100.00

Direct labor: 4 hours x $7 per hour 28.00
Variable overhead: 4 hours x $4 per hour 16.00
Total standard variable cost per unit $144.00

The company records materials price variances at the time of purchase.

The following activities occurred during the month of April:

Materials purchased 90,000 square feet at $5.10 per sq. foot

Materials used 82,000 square feet
Units produced 4,000 units
Direct labor 15,000 hours at $7.25 per hour
Actual variable overhead $59,000

Required:

a. Calculate the materials price variance and indicate whether it is favorable or unfavorable.

b. Calculate the materials usage variance and indicate whether it is favorable or unfavorable.

c. Calculate the labor rate variance and indicate whether it is favorable or unfavorable.

d. Calculate the labor efficiency variance and indicate whether it is favorable or unfavorable.

e. Calculate the variable overhead spending variance and indicate whether it is favorable or
unfavorable.

f. Calculate the variable overhead efficiency variance and indicate whether it is favorable or
unfavorable.

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Question 6

Tony Rondeli manufactures and sells homemade wine and he wants to develop a standard cost per
gallon. The following are required for production of a 50 – gallon batch:

3,000 ozs. of grape concentrate $0.04 per oz.

54 lbs of granulated sugar at $0.35 per lb
60 lemons at $0.60 each
50 yeast tablets at $0.25 each
50 nutrient tablets at $0.20 each
2,500 ozs of water at $0.004 per oz

Tony estimates that 4% of the grape concentrate is wasted, 10% of the sugar is lost and 20% of the
lemon cannot be used.

Required:
Compute the standard cost of the ingredients for one gallon of wine (Compute to two decimal places).

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Formulae
Direct Materials Variances
1. Total Direct Material
(SQ X SP) – (AQ XAP)

2. Direct Material Price

(SP – AP)AQ

3. Direct Material Usage

(SQ - AQ)SP

Direct Labour Variances

4. Total Direct Labour
(SH X SR) – (AH X AR)

5. Direct Labour Rate

(SR – AR)AH

6. Direct Labour Efficiency

(SH - AH)SR

7. Total Variable Overhead

(SVOR X SH) – (AVOR X AH)

8. Variable Overhead Expenditure

(SVOR – AVOR)AH

9. Variable Overhead Efficiency

(SH – AH)SVOR

Fixed Overhead Variances

10. Fixed Overhead Total
Fixed overhead absorbed – Actual fixed overhead incurred (over- or under absorbed overhead)

11. Fixed overhead expenditure

Budgeted fixed overhead expenditure – Actual fixed overhead incurred

12. Fixed overhead volume variance

(Budgeted production volume – Actual production volume)Standard absorption rate per unit

13. Fixed over head efficiency variance

(Standard hours for actual production – Actual hours taken)Standard absorption rate per hour

14. Fixed overhead capacity variance

(Budgeted hours worked – Actual hours worked)Standard absorption rate per hour

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