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Vega Company Has Developed the Following Standard Costs for Its \bullet

Question 180

Essay

Vega Company has developed the following standard costs for its product for 2011:  Vega Company has developed the following standard costs for its product for 2011:    The company expected to produce 25,000 units of Product A in 2011 and work 75,000 direct labor hours. Actual results for 2011 are as follows:  \bullet 26,000 units of Product A were produced.  \bullet Actual direct labor costs were $630,800 for 76,000 direct labor hours worked.  \bullet Actual direct materials purchased and used during the year cost $283,500 for 105,000 pounds.  \bullet Actual variable overhead incurred was $130,000 and actual fixed overhead incurred was $170,000. Instructions Compute the following variances showing all computations to support your answers. Indicate whether the variances are favorable or unfavorable. (a) Materials quantity variance. (b) Total direct labor variance. (c) Direct labor quantity variance. (d) Direct materials price variance. (e) Total overhead variance.
The company expected to produce 25,000 units of Product A in 2011 and work 75,000 direct labor hours.
Actual results for 2011 are as follows:
\bullet 26,000 units of Product A were produced.
\bullet Actual direct labor costs were $630,800 for 76,000 direct labor hours worked.
\bullet Actual direct materials purchased and used during the year cost $283,500 for 105,000 pounds.
\bullet Actual variable overhead incurred was $130,000 and actual fixed overhead incurred was $170,000.
Instructions
Compute the following variances showing all computations to support your answers. Indicate whether the variances are favorable or unfavorable.
(a) Materials quantity variance.
(b) Total direct labor variance.
(c) Direct labor quantity variance.
(d) Direct materials price variance.
(e) Total overhead variance.

Correct Answer:

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(a) Materials quantity variance = $3,000...

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