Reagen Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in December.
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 labor rate variance.e. Compute the variable overhead efficiency variance.f. Compute the variable overhead rate variance.

a. Standard quantity = 7,700 units × 3.7 liters per unit = 28,490 litersMaterials quantity variance = (Actual quantity − Standard quantity) × Standard price= (26,880 liters − 28,490 liters) × $5.00 per liter= (−1,610 liters) × $5.00 per liter= $8,050 Favorable
b. Materials price variance = Actual quantity × (Actual price − Standard price)= 28,400 liters × ($4.90 per liter − $5.00 per liter)= 28,400 liters × (−$0.10 per liter)= $2,840 Favorable
c. Standard hours = 7,700 units × 0.3 hours per unit = 2,310 hoursLabor efficiency variance = (Actual hours × Standard rate) − (Standard hours × Standard rate)= (2,270 hours × $21.00 per hour) − (2,310 hours × $21.00 per hour)= $47,670 − $48,510= $840 Favorable
d. Labor rate variance = (Actual hours × Actual rate) − (Actual hours × Standard rate)= (2,270 hours × $21.50 per hour) − (2,270 hours × $21.00 per hour)= $48,805 − $47,670= $1,135 Unfavorable
e. Standard hours = 7,700 units × 0.3 hours per unit = 2,310 hoursVariable overhead efficiency variance = (Actual hours − Standard hours) × Standard rate= (2,270 hours − 2,310 hours) × $7.00 per hour= (−40 hours) × $7.00 per hour= $280 Favorable
f. Variable overhead rate variance = Actual hours × (Actual rate − Standard rate)= 2,270 hours × ($6.40 per hour − $7.00 per hour)= 2,270 hours × (−$0.60 per hour)= $1,362 Favorable