Calculate various variances from the given data.
The standards for one case of liquid weed killer are:
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Direct materials
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3 lbs. @ $6.00/lb
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Direct labor
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1.8hrs. @ $12.00/hr
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Variable overhead (based on machine hours)
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0.6hrs. @ $3.50/hr
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During the week ended August 6, the following activity took place:
2390 machine hours were worked
11400 lbs. of raw material were purchased for inventory at a local cost $70680
3800 cases of finished product were produced
11290 lbs. of raw material were used
6720 labor hours were worked at an average rate of $12.25 per hour
$8126 actual variable overhead costs were incurred
Required:
Calculate each of the following variances and provide plausible explanations for the results:
a. Raw material purchase price variance:
b. Raw material usage variance:
c. Direct labor rate variance:
d. Direct labor efficiency variance:
e. Variable overhead spending variance:
f. Variable overhead efficiency variance:
Explanation of results:
g. Prepare a flexible budget based upon the production of 3800 cases. Remember to calculate the material spending budget based on purchases not production.