Henry Company has established the following standards for the costs of one unit of its product. The standard production overhead costs per unit are based on direct-labor hours. Calculation for standard per unit cost is as follows: Std Cost Std Qty Std Price/Rate Direct Material $ 14.40 6.00 kg $ 2.40/kg Direct Labor $ 3.00 0.40 hour $ 7.50/hour Variable Overhead $ 4.00 0.40 hour $ 10.00/hour Fixed Overhead* $ 4.80 0.40 hour $ 12.00/hour Total $ 26.20 *based on practical capacity of 2,500 direct-labor hour per month During December 2020, Henry purchased 30,000 kg of direct material at a total cost of $75,000. The total wages for December were $20,000, 75% of which were for direct labor. Henry manufactured 4,500 units of product during December 2020, using 28,000kg of the direct material purchased in December and 2,100 direct-labor hours. Actual variable and fixed overhead cost were $23,100 and $25,000, respectively. The scheduled production for the month was 5,000 units. Required: Calculate the following variances for December 2020, indicate whether each is favorable or unfavorable, and provide brief explanation of possible reasons for the related variances The direct-labor rate variance The direct-labor efficiency variance The Variable Overhead spending variance
Henry Company has established the following standards for the costs of one unit of its product. The standard production overhead costs per unit are based on direct-labor hours. Calculation for standard per unit cost is as follows:
|
Std Cost |
Std Qty |
Std Price/Rate |
|
|
Direct Material |
$ 14.40 |
6.00 kg |
$ 2.40/kg |
|
Direct Labor |
$ 3.00 |
0.40 hour |
$ 7.50/hour |
|
Variable Overhead |
$ 4.00 |
0.40 hour |
$ 10.00/hour |
|
Fixed Overhead* |
$ 4.80 |
0.40 hour |
$ 12.00/hour |
|
Total |
$ 26.20 |
|
|
*based on practical capacity of 2,500 direct-labor hour per month
During December 2020, Henry purchased 30,000 kg of direct material at a total cost of $75,000. The total wages for December were $20,000, 75% of which were for direct labor. Henry manufactured 4,500 units of product during December 2020, using 28,000kg of the direct material purchased in December and 2,100 direct-labor hours. Actual variable and fixed overhead cost were $23,100 and $25,000, respectively. The scheduled production for the month was 5,000 units.
Required:
Calculate the following variances for December 2020, indicate whether each is favorable or unfavorable, and provide brief explanation of possible reasons for the related variances
- The direct-labor rate variance
- The direct-labor efficiency variance
- The Variable Overhead spending variance
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