Ronald Company Has a Standard Costing System and Keeps All

Essay

Ronald Company has a standard costing system and keeps all its costs up to date. The company specializes in producing herbal medicines. The standard variable costs for producing 1 liter herbal oil are as follows:

The company's normal capacity is 15,000 direct labor hours. Its budgeted fixed overhead costs for the year were $27,000. During the year, it produced and sold 22,000 liters and it purchased 51,250 units of direct materials; the purchase cost was $1.50 per unit. The average labor rate was $4.90 per hour, and 15,500 direct labor hours were worked. The company's actual variable overhead costs for the year were $50,100, and its fixed costs were $25,500.
Using the data given, compute the following using formulas or diagram form:
1. Direct materials cost variances:
a. Direct materials price variance
b. Direct materials quantity variance
c. Total direct materials cost variance

2. Direct labor cost variances:
a. Direct labor rate variance
b. Direct labor efficiency variance
c. Total direct labor cost variance

3. Variable overhead variances:
a. Variable overhead spending variance
b. Variable overhead efficiency variance
c. Total variable overhead variance

4. Fixed overhead variances:
a. Fixed overhead budget variance
b. Fixed overhead volume variance
c. Total fixed overhead variance