at Standard Rate (SH × SR) 60,000 hours* × 55,000 hours × 55,000 hours × $14.00 per hour $14.00 per hour $15 per hour = $840,000 = $770,000 = $825,000 Labor efficiency variance Labor rate variance = $70,000 F = $55,000 U Spending variance = $15,000 F *30,000 units × 2.0 hours per unit = 60,000 hours Alternatively, the variances can be computed using the formulas: Labor efficiency variance = SR (AH SH) – = $14.00 per hour (55,000 hours 60,000 hours) – = $70,000 F Labor rate variance = AH (AR SR) – = 55,000 hours ($15.00 per hour $14.00 per hour) – = $55,000 U The Foundational 15 (continued) 9., 10., and 11. The variable overhead cost included in the flexible budget (SH × SR = $300,000), the variable overhead efficiency variance ($25,000 F), and the variable overhead rate variance ($55,000 U) can be computed using the general model for cost variances as follows: Standard Hours Allowed for Actual Output, Actual Hours of Input, Actual Hours of Input, at Standard Rate at Standard Rate at Actual Rate (SH × SR) (AH × SR) (AH × AR) 60,000 hours* × 55,000 hours × $5.00 per hour $5.00 per hour = $300,000 = $275,000 = $280,500 Variable overhead Variable overhead efficiency variance rate variance = $25,000 F = $5,500 U
at Standard Rate (SH × SR) 60,000 hours* × $14.00 per hour = $840,000 55,000 hours × $14.00 per hour = $770,000 55,000 hours × $15 per hour = $825,000 Labor efficiency variance = $70,000 F Labor rate variance = $55,000 U Spending variance = $15,000 F *30,000 units × 2.0 hours per unit = 60,000 hours Alternatively, the variances can be computed using the formulas: Labor efficiency variance = SR (AH – SH) = $14.00 per hour (55,000 hours – 60,000 hours) = $70,000 F Labor rate variance = AH (AR – SR) = 55,000 hours ($15.00 per hour – $14.00 per hour) = $55,000 U The Foundational 15 (continued) 9., 10., and 11. The variable overhead cost included in the flexible budget (SH × SR = $300,000), the variable overhead efficiency variance ($25,000 F), and the variable overhead rate variance ($55,000 U) can be computed using the general model for cost variances as follows: Standard Hours Allowed for Actual Output, at Standard Rate (SH × SR) Actual Hours of Input, at Standard Rate (AH × SR) Actual Hours of Input, at Actual Rate (AH × AR) 60,000 hours* × $5.00 per hour = $300,000 55,000 hours × $5.00 per hour = $275,000 = $280,500 Variable overhead efficiency variance = $25,000 F Variable overhead rate variance = $5,500 U
Day-13-chapter-8.docx