Calculate variable cost variances—explain results The standards for one case of
Springfever Tonic are:
Direct materials . . . . . . . . . . . . . . . . . . 8 lbs. @ $3.00/lb. = $24
Direct labor . . . . . . . . . . . . . . . . . . . . . 6 hrs. @ $1 0.00/hr. = 60
Variable overhead (based
on direct labor hours) . . . . . . . . . . . . 6 hrs. @ $5.00/hr. = 30
During the week ended April 27, the following activity took place:
14,800 lbs. of raw materials were purchased for inventory at a cost of $2.97 per pound.
2,000 cases of finished product were produced.
16,600 lbs. of raw materials were used.
11,600 direct labor hours were worked at a total cost of $121,800.
$60,900 of actual variable overhead costs were incurred.
Required:
Calculate each of the following variances and provide plausible explanations for the results:
a. Price variance for raw materials purchased.
b. Raw materials usage variance.
c. Direct labor rate variance.
d. Direct labor efficiency variance.
e. Variable overhead spending variance.
f. Variable overhead efficiency variance.