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Q1) Downes Consolidated Industries International utilizes standard cost system and records standards in  accounting records. Standard costs for one of its products are given below.

Direct materials, 3 lbs. @ $20 per lb.  $60.00
Direct labor, 2 hrs. @ $15 per hr. 30.00
Variable overhead, 4 machine hrs. @ $1 per hr. 4.00
Fixed overhead, 4 machine hrs. @ $2.50 per hr. 10.00
Total $104.00

Overhead is applied on the basis of machine hours. Planned level of activity (denominator level) is= 320,000 machine hours. Total budgeted fixed overhead is= $800,000.

Other budgeted items are:

Units selling price, $175.00 per unit
Variable selling & administrative expenses, $5 per unit.
Fixed selling & administrative expenses, $160,000.
Planned level of production and sales, 80,000.


Direct materials purchased, 250,000 lbs. @ $22 per lb.
Direct materials used, 240,000
Direct labor, 150,000 hrs., total cost, $2,225,000
Variable overhead, $340,000
Fixed overhead, $810,000
Units produced, 82,000
Units soldd, 80,500
Selling price per unit, 160.00
Variable selling & administrative expenses, $410,000.
Fixed selling & administrative, $175,000.
Actual machine hours, 330,000.


Compute the variances given below and indicate whether each is favorable or unfavorable.

1. Materials price variance
2. Materials quantity variance
3. Labor rate variance
4. Labor efficiency variance
5. Variable overhead spending variance
6. Fixed overhead volume variance
7. Sales per variance
8. Sales quantity variance
9. Variable selling & admin. Exp. Variance
10. Fixed selling & admin. Exp. Variance

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  • Reference No.:- M918702

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