Hector Company Has Developed the Following Standard Costs for Its $\bullet$

question 176

Essay

Hector Company has developed the following standard costs for its product for 2016:
The company expected to produce 30,000 units of Product A in 2017 and work 90,000 direct labor hours.
Actual results for 2017 are as follows:
$\bullet$ 31,000 units of Product A were produced.
$\bullet$ Actual direct labor costs were $746,200 for 91,000 direct labor hours worked.
$\bullet$ Actual direct materials purchased and used during the year cost $346,500 for 126,000 pounds.
$\bullet$ Actual variable overhead incurred was $155,000 and actual fixed overhead incurred was $205,000.
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.

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Definitions:

Net Operating Income

The income earned from a company's activities once operational costs have been deducted from revenues generated from operations.

Price Reduction

A decrease in the selling price of goods or services, often to increase demand or sales volume.

High Pressure Pump

A type of pump designed to move fluids under high pressure, commonly used in hydraulic systems, water supply, and oil and gas applications.

Useful Life

The estimated period that an asset is expected to be functional and contribute to a company's operations.