Cost variance analysis

Gourmet, Inc. produces containers of frozen food.During October the company had the following actual production and costs.

Actual Containers produced in October

720

Variable Overhead

$5,700

Fixed Overhead

$13,000

Direct Labor cost

$80,000

Which is

3,900

Direct labor hours

Actual material purchased

$28,000

Which is

15,000

pounds

Actual Material pounds used

14,600

pounds

Overhead is budgeted and applied using direct-labor hours.Standard cost and annual budget information are as follows:

Standard cost per container

Direct Labor

5

hours

at

$19.75

$99

Direct Material

20

pounds

at

$2.00

$40

Variable overhead

5

Direct labor hours

at

$1.50

$7.50

Fixed Overhead

5

Direct labor hours

at

$3.00

$15

Total

$161.25

Budgeted Monthly Fixed Overhead

$12,500

1.Calculate thedirect materials price and quantity variance.Please note that the materials price variance is based on actual material purchased and the quantity variance is based on material used.

Materials price variance

Materials Quantity variance

2.Calculate the direct labor rate and efficiency variances.

Labor rate variance

Labor Efficiency variance

3.Calculate the variable overhead spending and efficiency variances.

Variable overhead spending variance

Variable overhead efficiency variance

4.Calculate the fixed overhead budget variance.

Fixed overhead budget variance

5. Pick out the two variances that you computed above that you think should be further investigated.Explain why you picked these 2 variances and what might be the possible cause of the variances.