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Vienna Chocolate Company produces fudge in large batches
Vienna Chocolate Company produces fudge in large batches. One batch of fudge has the following standard costs and amounts:
Standard kilograms of sugar
100
Standard cost per kilogram of sugar
$1.90
Standard direct labour hours
2.0
Standard direct labour cost per hour
$18.00
Vienna Chocolate Company produced 400 batches of fudge in the most recent month. Actual input costs and per batch usage levels were as follows:
Actual kilograms of sugar used
102
Actual cost per kilogram of sugar
$2.10
Actual direct labour hours
1.8
Actual direct labour cost per hour
$17.50
Required:
a) Calculate the total material input rate variance.
b) Calculate the total material efficiency variance.
c) Calculate the total labour rate variance.
d) Calculate the total labour efficiency variance.
Expert Solution
a) Computation of the total material input rate variance:-
Actual quantity = 400 * 102
= 40,800
Material input rate variance = (Actual cost - Standard cost) * Actual quantity
= ($2.10 - $1.90) * 40,800
= $0.20 * 40,800
= $8,160 (U)
b) Computation of the total material efficiency variance:-
Standard quantity = 400 * 100
= 40,000
Material efficiency variance = (Actual quantity - Standard Quantity) * Standard cost
= (40,800 - 40,000) * $1.90
= 800 * $1.90
= $1,520 (U)
c) Computation of the total labor rate variance:-
Actual direct labor hours = 1.80 * 400
= 720 hours
Labor rate variance = (Actual rate - Standard rate) * Actual direct labor hours
= ($17.50 - $18.00) * 720
= $0.50 * 720
= $360 (F)
d) Computation of the total labor efficiency variance:-
Standard direct labor hours = 400 * 2.00
= 800
Labor efficiency Variance = (Actual labor hours - Standard labor hour) * Standard Rate
= (720 - 800) * $18.00
= 80 * $18.00
= $1,440 (F)
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