Question
Galeazzi Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct materials 3.0 pounds $5.70 per pound
Galeazzi Corporation makes a product with the following standard costs:
| Standard Quantity or Hours | Standard Price or Rate |
Direct materials | 3.0 pounds | $5.70 per pound |
Direct labor | 0.9 labor hours | $17.00 per labor hour |
Variable overhead | 0.8 machine hours | $6.60 per machine hour |
The company applies variable overhead on the basis of machine-hours. The direct materials purchase variance is computed when the materials are purchased. In October the company produced 3,000 units.
Use this information to compute the variances in questions A E below. If the variance is favorable (F), enter the variance as a positive number, but if the variance is unfavorable(U), enter it as a negative number.
1.) The company used 8,246 pounds of the direct material to make the 3,000 units. What is the materials quantity variance?
2.) During the month, the company purchased 9,084 pounds of the direct material at a total cost of $45,205. Of the purchases, only the pounds reported in question (a) were used in production. What is the materials price variance?
3.) The company incurred 2,621 direct labor-hours during the month to make the 3,000 units. What is the labor efficiency variance?
4.) Ignore the labor-hours listed in question (c), and instead assume 2,600 labor hours were worked and the total cost of labor was $48,334. What is the labor rate variance?
5.) The company incurred 2,299 machine-hours during the month and the actual variable overhead cost was $17,146. What is the variable overhead rate variance?
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