Quick Machine Co. produced 70,000 units of product during the month of March. Four units of materials, each having a standard cost of P3 are required for each unit of product. The company purchased 300,000 units of materials at a total cost of P915,000. During the month, 283,000 units of materials were used to produce the 70,000 units of product. According to the standards, the 70,000 units of product should be manufactured in 3,500 labor hours at a standard rate of P60 per hour. The actual labor time was 3,300 hours, and 3,000 of these hours were paid at the standard rate. The remaining hours were paid at the rate of P70 per hour. The company has a normal operating capacity of 5,000 labor hours per month. The variable overhead cost is budgeted at P5 per labor hour, and the fixed overhead is budgeted at P80,000 for the month. Actual overhead for the month amounted to P100,000. The fixed overhead was in agreement with the budget. REQUIRED: 1. Determine the total standard cost per unit of finished product. 2. Determine the materials and labor variances graphically and by formula. 3. Prepare a flexible overhead budget using the format of page 217. 4. Determine the overhead variances using the two 3-way methods. 217 Flexible Overhead Budget Standard time for one pair x Normal production x Actual production HOURS Normal Rate/Hr. Normal Time 1.2 hrs. 2,500 prs. Actual Time Standard Time 1.2 hrs. 2,800 prs. 3,000 3,200 3,360 Fixed overhead Variable overhead P10.00 P30,000 P30,000 P30,000 Total overhead 40.00 120,000 128,000 134,400 P50.00 P150,000 P158,000 P164,400 1. Spending variance 3-Way Overhead Variance Analysis Actual overhead Less: Budgeted overhead, actual time P160,000 158,000 P2,000 U 2. Capacity variance Actual time Less: Normal time Capacity variance (hours) x Normal fixed overhead rate 3,200 hrs. 3,000 hrs. 200 hrs. P10.00 2,000 F 3. Efficiency variance Standard time 3,360 hrs. Less: Actual time 3,200 hrs. Time savings (hours) 160 hrs. x Normal total overhead rate P50.00 8,000 F Total variance P8,000 F To countercheck: Total actual overhead incurred P160,000 Less: Total applied standard (P50 x 3,360 hrs.) 168,000 Overall variance P8,000 F