Company produces a single product. Manufacturing overhead costs are applied to products on the basis of direct labor hours. Budget for current year: Denominator activity (direct labor-hours) 6,000 Variable manufacturing overhead cost $21,000 Fixed manufacturing overhead cost $18,000 The standard cost card for the product follows: Direct materials............................................... 2.5 ounces at $20 per ounce Direct labor..................................................... 1.4 hours at $12.50 per hour Variable manufacturing overhead.................. 1.4 hours at $3.5 per hour The following data are available for October: · 3,750 units of compound were produced during the month. · There was no beginning direct materials inventory. · The ending direct materials inventory was 2,000 ounces. · Direct materials purchased: 12,000 ounces for $225,000. · Direct labor hours worked: 5,600 hours at a cost of $67,200. · Variable manufacturing overhead costs incurred amounted to $18,200. · Fixed manufacturing overhead costs incurred amounted to $15,000. - Compute Direct materials price and quantity variances, Direct labor rate and efficiency variances, and variable overhead rate and efficiency variances. Compute the fixed overhead budget and volume variances
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Company produces a single product. Manufacturing
|
Budget for current year: |
|
|
Denominator activity (direct labor-hours) |
6,000 |
|
Variable |
$21,000 |
|
Fixed manufacturing overhead cost |
$18,000 |
The
|
|
Direct materials............................................... |
2.5 ounces at $20 per ounce |
|
|
Direct labor..................................................... |
1.4 hours at $12.50 per hour |
|
|
Variable manufacturing overhead.................. |
1.4 hours at $3.5 per hour |
The following data are available for October:
· 3,750 units of compound were produced during the month.
· There was no beginning direct materials inventory.
· The ending direct materials inventory was 2,000 ounces.
· Direct materials purchased: 12,000 ounces for $225,000.
· Direct labor hours worked: 5,600 hours at a cost of $67,200.
· Variable manufacturing overhead costs incurred amounted to $18,200.
· Fixed manufacturing overhead costs incurred amounted to $15,000.
- Compute Direct materials price and quantity variances, Direct labor rate and efficiency variances, and variable overhead rate and efficiency variances. Compute the fixed overhead budget and volume variances
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maybe there is some wrong here ? how can 12,000-10,000 = 10,000
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