Problem - Calculate variable cost variances - explain results. The standards for one case of liquid weed killer are:
Direct materials............................3 lbs. @ 6.00/lb.
Direct labor..............................1.8 hrs. @ 12.00/hr.
Variable overhead (based on machine hours).0.6 hr..@ 3.50/hr.
During the week ended August 6, the following activity took place: 2,390 machine hours were worked.
11,400 lbs. of raw material were purchased for inventory as a total cost of $70,680.
3,800 cases of finished product were produced.
11,290 lbs. of raw material were used.
6,720 labor hours were worked at an average rate of $12.25 per hour.
$8,126 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.