(Appendix 10B ) Prepare an income statement using a standard cost system. LO10-5 Materials Price Variance: Materials price variance (AQ x AP-(AQx SP Materials price variance AQAP-SP Materials price variance 6,500 pounds ($3.80 per pound - $4.00 per pound) Materials price variance $1,300 F Materials Quantity Variance: Materials quantity variance (AQx SP)-(SQx SP) Materials quantity variance SP(AQ-S Materials quantity variance $4.00 per pound (6,500 pounds-6,000 pounds) Materials quantity variance $2,000 U where: AQ=Actual quantity of inputs purchased and used in production SO=Standard quantity of inputs allowed for the actual output AP=Actual price per unit of the input SP= Standard price per unit of the input EXHIBIT 10-7 Direct Labor Variances: The Equations-Based Approach Labor Rate Variance: Labor rate variance = (AHx AR)-(AHx SR Labor rate variance AHAR-SR) Labor rate variance 1,050 hours ($21.60 per hour - $22.00 per hour) Labor rate variance = $420 F Labor Efficiency Variance: Labor efficiency variance = (AHx SR-(SHx SR) Labor efficiency variance = SR{AH- SH Labor efficiency variance = $22.00 per hour (1,050 hours-1,000 hours) Labor efficiency variance = $1,100 U where AH=Actual quantity of labor-hours used in production SH=Standard quantity of labor-hours allowed for the actual output AR=Actual rate per direct labor-hour SR=Standard rate per direct labor-hour EXHIBIT 10-8 Standard Cost Variance Analysis-Variable Manufacturing Overhead (3) Standard Hours Allowed for Actual Output, (2) Actual Hours (1) Actual Hours of Input, of Input, at Actual Rate at Standard Rate at Standard Rate (SH x SR) (AH X SR) (AH x AR) 1,000 hours x $6.00 per hour $6,000 1,050 hoursx $6.00 per hour $6,300 1,050 hours x $6.80 per hour $7,140 Variable overhead efficiency variance $300 U Variable overhead rate variance $840 U $1,140 U Spending Variance 2,000 units x 0.5 hours per unit 1,000 hours. $7.140+1,050 hours $6.80 per hour F Favorable: U Unfavorable. (Appendix 10B ) Prepare an income statement using a standard cost system. LO10-5 Materials Price Variance: Materials price variance (AQ x AP-(AQx SP Materials price variance AQAP-SP Materials price variance 6,500 pounds ($3.80 per pound - $4.00 per pound) Materials price variance $1,300 F Materials Quantity Variance: Materials quantity variance (AQx SP)-(SQx SP) Materials quantity variance SP(AQ-S Materials quantity variance $4.00 per pound (6,500 pounds-6,000 pounds) Materials quantity variance $2,000 U where: AQ=Actual quantity of inputs purchased and used in production SO=Standard quantity of inputs allowed for the actual output AP=Actual price per unit of the input SP= Standard price per unit of the input EXHIBIT 10-7 Direct Labor Variances: The Equations-Based Approach Labor Rate Variance: Labor rate variance = (AHx AR)-(AHx SR Labor rate variance AHAR-SR) Labor rate variance 1,050 hours ($21.60 per hour - $22.00 per hour) Labor rate variance = $420 F Labor Efficiency Variance: Labor efficiency variance = (AHx SR-(SHx SR) Labor efficiency variance = SR{AH- SH Labor efficiency variance = $22.00 per hour (1,050 hours-1,000 hours) Labor efficiency variance = $1,100 U where AH=Actual quantity of labor-hours used in production SH=Standard quantity of labor-hours allowed for the actual output AR=Actual rate per direct labor-hour SR=Standard rate per direct labor-hour EXHIBIT 10-8 Standard Cost Variance Analysis-Variable Manufacturing Overhead (3) Standard Hours Allowed for Actual Output, (2) Actual Hours (1) Actual Hours of Input, of Input, at Actual Rate at Standard Rate at Standard Rate (SH x SR) (AH X SR) (AH x AR) 1,000 hours x $6.00 per hour $6,000 1,050 hoursx $6.00 per hour $6,300 1,050 hours x $6.80 per hour $7,140 Variable overhead efficiency variance $300 U Variable overhead rate variance $840 U $1,140 U Spending Variance 2,000 units x 0.5 hours per unit 1,000 hours. $7.140+1,050 hours $6.80 per hour F Favorable: U Unfavorable
