27 Jun Variance Analysis for Decision Making
Instructions:
Part C: Variance Analysis for Decision Making
Bronfenbrenner Co. uses a standard cost system for its single product in which variable overhead is applied on the basis of direct labor hours. The following information is given:
Standard costs per unit:
Raw materials (1.5 grams at $16 per gram) ………………………. $24.00
Direct labor (0.75 hours at $8 per hour)……………………………. $6.00
Variable overhead (0.75 hours at $3 per hour)…………………… $2.25
Actual experience for current year:
Units produced ……………………………………………………………… 22,400 units
Purchases of raw materials (21,000 grams at $17 per gram) .. $357,000
Raw materials used………………………………………………………… 33,400 grams
Direct labor (16,750 hours at $8 per hour)………………………… $134,000 Variable overhead cost incurred………………………………………. $48,575
Required:
Compute the following variances for raw materials, direct labor, and variable overhead, assuming that the price variance for materials is recognized at point of purchase:
a. Direct materials price variance.
b. Direct materials quantity variance.
c. Direct labor rate variance.
d. Direct labor efficiency variance.
e. Variable overhead spending variance.
f. Variable overhead efficiency variance.
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