Apple Company manufactures wooden chairs and uses a standard cost system which sets predetermined overhead rates on the basis of direct labor-hours. At the beginning of the year, the company expected to manufacture and sell 1,800 units. The normal selling price of each chair is $200. The company's standard cost of production is given in the table below. Standard Cost (Based on 1,800 units) Direct materials, 3 metres at $25/metre $75/unit Direct labor, 2.5 hours at $28/hour $70/unit Variable manufacturing overhead cost $30/unit Budgeted fixed manufacturing overhead cost $45/unit During the year, the company produced and sold 1,600 units of product and incurred the following costs: Actual Cost Actual materials purchased 5,200 metres @ $24.5/metre Actual materials used in production 4,900 metres Actual direct labor cost incurred 4,200 hours @ $29/per hour Actual variable manufacturing overhead Actual fixed manufacturing overhead $54,200 $80,000 Total revenue $332,800

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Determine the following variances, and state clearly whether each is favourable or unfavourable.

 

(i) direct materials price, inventory, and quantity variances;

 

(ii) direct labor rate and efficiency variances;

 

(iii) variable overhead rate and efficiency variances;

 

(iv) fixed overhead budget and volume variances; and

 

(v) sales price and sales volume variances

Apple Company manufactures wooden chairs and uses a standard cost system which sets
predetermined overhead rates on the basis of direct labor-hours. At the beginning of the year, the
company expected to manufacture and sell 1,800 units. The normal selling price of each chair is $200.
The company's standard cost of production is given in the table below.
Standard Cost (Based on 1,800 units)
Direct materials, 3 metres at $25/metre
$75/unit
Direct labor, 2.5 hours at $28/hour
$70/unit
Variable manufacturing overhead cost
$30/unit
Budgeted fixed manufacturing overhead cost
$45/unit
During the year, the company produced and sold 1,600 units of product and incurred the following
costs:
Actual Cost
Actual materials purchased
Actual materials used in production
5,200 metres @ $24.5/metre
4,900 metres
Actual direct labor cost incurred
4,200 hours @ $29/per hour
Actual variable manufacturing overhead
$54,200
Actual fixed manufacturing overhead
$80,000
Total revenue
$332,800
Transcribed Image Text:Apple Company manufactures wooden chairs and uses a standard cost system which sets predetermined overhead rates on the basis of direct labor-hours. At the beginning of the year, the company expected to manufacture and sell 1,800 units. The normal selling price of each chair is $200. The company's standard cost of production is given in the table below. Standard Cost (Based on 1,800 units) Direct materials, 3 metres at $25/metre $75/unit Direct labor, 2.5 hours at $28/hour $70/unit Variable manufacturing overhead cost $30/unit Budgeted fixed manufacturing overhead cost $45/unit During the year, the company produced and sold 1,600 units of product and incurred the following costs: Actual Cost Actual materials purchased Actual materials used in production 5,200 metres @ $24.5/metre 4,900 metres Actual direct labor cost incurred 4,200 hours @ $29/per hour Actual variable manufacturing overhead $54,200 Actual fixed manufacturing overhead $80,000 Total revenue $332,800
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