1) Compute the ff

a) Direct materials price and quantity variance

i) Direct Materials Price Variance
(AP - SP) x AQ purchased
(1.95 – 2.00) x 60 000
3000F
i) Direct Materials Quantity Variance
(AQ used – SQ allowed) x SP
(49 200 – 45 000) x 2
8400U

b) Direct Labor Rate and Efficiency Variance

i) Direct Labor Rate Variance
(AR – SR) x AH
(7 – 6) x 11 800
11 800U
ii) Direct Labor Efficiency Variance
(AH – SH) x SR
(11 800 – 12 000) x 6
1200F
c) Variable Overhead Rate and Efficiency Variance
i) Variable Overhead Rate Variance
(AR – SR) x AH
(3.1 – 3) x 5 900
590U
ii) Variable Overhead Efficiency Variance
(AH – SH) x SR
(5 900 – 6 000) x 3
300F
2) Summarize the variance that you computed in (1) above by showing the net overall favorable or
unfavorable variance for the month. What impact did this figure have on the company’s income
statement? Show computations

a)
Direct Materials Price Variance 3 000F
Direct Materials Quantity Variance 8 400U
Direct Labor Rate Variance 11 800U
Direct Labor Efficiency Variance 1 200F
Variable Overhead Rate Variance 590U
Variable Overhead Efficiency Variance 300F
Net Variance 16 290U

b) The net variance of 16 290U makes the Actual COGS to be bigger than the Budgeted COGS. To
compute the Actual COGS
 Budgeted COGS (Given) 180 000
Net Variance (Unfavorable) 16 290
Actual COGS 196 290

c) The net variance of 16 290U makes the Actual Net Operating Income lower than the Budgeted
Net Operating Income. To compute the Actual Net Operating Income

Budgeted Net Operating Income (Given) 36 000

Net Variance (Unfavorable) 16 290
Actual Net Operating Income 19 710