Foster Corporation uses a standard cost system. There is no beginning or ending work in process, and finished goods inventory balances.

The following information was provided concerning the one product produced by this company for the period that just ended:

This company used Direct labor hours as the cost driver for the application of overhead.

Actual price per kilogram

$2.94

Actual kilograms of material used

31,500

Actual kilograms of material purchased

32,000

Actual hourly labor rate

$17.49

Actual hours of production

4,900

labor hrs.

Standard price per kilogram

$2.96

Standard kilograms per completed unit

6

Standard hourly labor rate

$17.90

Standard time per completed unit

1

Hour

Actual Variable factory overhead

$17,395.00

Actual Fixed factory overhead

$18,200.00

Standard fixed factory overhead rate

$3.25

per labor hour

Standard variable factory overhead rate

$3.80

per labor hour

Budgeted fixed overhead

$18,300.00

Units completed during the period

4,950

You have just been hired by a local plastic pool manufacturer to determine if they are controlling their costs.

Required: Make sure you do not forget to label the variances U or F.
1. Calculate the direct materials price and quantity variance.
Direct-material purchase price variance should be based on material purchased, since you want to isolate the variance as soon as possible. See bottom page 418
Direct-material Quantity variance should be based on materials used, since this is monitoring the production efficiency. See top of page 418.
Direct-material purchase price variance
Direct Material Quantity variance