Problem 11.5 (LO1, 2) Excel Comprehensive Variance Problem The Hayes Chemical Company produces a chemical used in dry cleaning. Its accounting system uses standard costs. The standards per .5-gallon can of chemical call for 1.20 gallons of material and 1.50 hours of labor. (1.20 gallons of material are needed to produce a .5-gallon can of product due to evaporation.) The standard cost per gallon of material is $6.00. The standard cost per hour for labor is $9.00. Overhead is applied at the rate of $7.75 per can. Expected production is 20,000 cans with fixed overhead per year of $55,000 and variable overhead of $5.00 per unit (a .5-gallon can). During 2021, 23,000 cans were produced; 35,000 gallons of material were purchased at a cost of $250,000; 30,000 gallons of material were used in production. The cost of direct labor incurred in 2021 was $290,000 based on an average actual wage rate of $8.25 per hour. Actual overhead for 2021 was $220,000. Required a. Determine the standard cost per unit. b. Calculate material, labor, and overhead variances. c. List a possible cause for each variance.25 Required 26 a. Determine the standard cost per unit. 27 28 Material X 29 Labor X 30 Variable overhead 31 Fixed overhead = 32 Total unit cost 33 34 b. Calculate the material, labor, and overhead standards. 35 36 Material price variance 37 X = 38 Favorable or unfavorable? 39 40 Material quantity variance 41 X = 42 Favorable or unfavorable? 43 44 Labor rate variance 45 X 46 Favorable or unfavorable? 47 48 Labor efficiency variance 49 X = 50 Favorable or unfavorable? 51 52 Overhead controllable variance 53 = 54 Favorable or unfavorable? 55 56 Overhead volume variance 57 = 58 Favorable or unfavorable? 59 60 c. List a possible cause for each variance.60 c. List a possible cause for each variance. 61 62 Unfavorable Material Price Variance: 63 64 65 66 67 68 Unfavorable Material Quantity Variance: 69 70 71 72 73 74 Favorable Labor Rate Variance: 75 76 77 78 79 80 Unfavorable Labor Efficiency Variance: 81 82 83 84 85 86 Unfavorable Controllable Overhead Variance: 87 88 89 90 91 92 Favorable Overhead Volume Variance: 93 94 95 96