Ralston Corporation Makes a Product with the Following Standard Costs

question 25

Essay

Ralston Corporation makes a product with the following standard costs:
$\begin{array}{lccc}&\text { Standard Quantity or } & \text { Standard Price or } & \text { Standard Cost }\\\quad \text { Inputs } & \text { Hours } & \text { Rate } & \text { Per Unit } \\\text { Direct materials } & \text { 6.9liters } & \$ 5.00 \text { per liter } & \$ 34.5 \mathrm{C} \\\text { Direct labor } & 0.3 \text { hours } & \$ 17.09 \text { er hour } & \$ 5.1 \mathrm{C} \\\text { Variable overhead } & 0.3 \text { hours } & \$ 6.00 \text { per hour } & \$ 1.8 \mathrm{C}\end{array}$
The company reported the following results concerning this product in August.
$\begin{array}{lr}\text { Originally budgeted output } & 8,600 \text { annits } \\\text { Actual output } & 8,400 \text { anits } \\\text { Raw materials used in production } & 58,330 \text { liters } \\\text { Actual direct labor-hours } & 2,310 \text { hours } \\\text { Purchases of raw materials } & 62,500 \text { liters } \\\text { Actual price of raw materials } & \$ 4.90 \text { per liter } \\\text { Actual direct labor rate } & \$ 17.10 \text { per hour } \\\text { Actual variable overhead rate } & \$ 5.50 \text { per hour }\end{array}$

The materials price variance is recognized when materials are purchased. Variable overhead is applied on the basis of direct labor-hours.
Required:
a. Compute the materials quantity variance.
b. Compute the materials price variance.
c. Compute the labor efficiency variance.
d. Compute the direct labor rate variance.
e. Compute the variable overhead efficiency variance.
f. Compute the variable overhead rate variance.

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Definitions:

Quantity Supplied

The total quantity of goods or services that businesses are ready and willing to sell at a designated price for a fixed period.

Productive Efficiency

A situation where a firm or economy cannot produce more of one good without reducing the output of another good, indicating optimal production levels.

Production Possibilities Curve

A curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the available supplies of resources and technology are fixed.

Government-Mandated

Regulations or requirements imposed by governmental bodies that must be followed by individuals, businesses, or other organizations.