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Problem 10B-3 (continued)
5. The variances have many possible causes. Some of the more likely
causes include the following:
Materials variances:
Favorable price variance: Good price, inferior quality materials, unusual
Problem 10B-4 (continued)
Given these figures, the variances are:
Actual Hours of
Input, at the
Actual Rate
Actual Hours of Input,
at the Standard Rate
Standard Hours
Allowed for Output, at
the Standard Rate
(AH × AR)
(AH × SR)
(SH × SR)
16,500 hours ×
$5.00 per hour
16,000 hours ×
$5.00 per hour
$79,200
= $82,500
= $80,000
Rate Variance,
$3,300 F
Efficiency Variance,
$2,500 U
Spending Variance,
$800 F
Alternatively, the variances can be computed using the formulas:
Labor rate variance = AH (AR – SR)
16,500 hours ($4.80 per hour* – $5.00 per hour) = $3,300 F
*79,200 ÷ 16,500 hours = $4.80 per hour
Labor efficiency variance = SR (AH – SH)
$5.00 per hour (16,500 hours – 16,000 hours) = $2,500 U
b.
Work in Process
(16,000 hours × $5.00 per hour) .....................
80,000
Labor Efficiency Variance
(500 hours U × $5.00 per hour) ......................
2,500
Labor Rate Variance
(16,500 hours × $0.20 per hour F) .............
3,300
Wages Payable
(16,500 hours × $4.80 per hour) ................
79,200
