Question

Smart Hearing marnufactures headphone cases. During September 2018, the company produced and sold 105.000 cases and recorded the following cost data Click the loon to view the cost data) Read the reauirements Requirement 1. Compute the cost and efficiency variances for direct materials and direct labor Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance is favorable (F) or untavorable (U). (Abbreviations used AC - actual cost AQ actual quantity, FOH fed overhead sc standard cost sQ standard quantity) Formla Variance Direct materials cost variance Direct labor cost variance Next compute the efficiency variances. Select the required formulas, compute the officiency variances for direct materials and direct labor, and identity whether each variance is favorable (F) or unfavorable (U) (Abbreviations used AC cost AQ actual quantity FOH Eed overhead SC standand cost SQ standard quantity) actual Fomul Vwiance Direct materials effciency vaiance Direct labor efficiency variance Requirement 2. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the faed overhead cost and volume variances Now compute the variable overhead cost and efficiency variances Select the required formulas, compute the variable overhead cost and efficlency variances, and ldentity whether each variance is favorable (F) or unfavorable (U) (Abbreviations used AC actual cost, AQ actual quantity, FOH fieed overhead, SC standard cost, SQ standard quantity, VOH variable overhead)I Formula Variance VOH cost variance Choose from any list or enter any number in the input fields and then continue to the next question 2 5

data

Answer 1

Part 1

		Formula		variance
Direct materials cost variance	=	(AC-SC)xAQ	=	$10300	U
Direct labor cost variance	=	(AC-SC)xAQ	=	$240	U

Direct materials cost variance = (AC-SC)xAQ = (0.21-0.16)*206000 = $10300 U

Direct labor cost variance = (AC-SC)xAQ = (7.15-7.00)*1600 = $240 U

		Formula		variance
Direct materials efficiency variance	=	(AQ-SQ)xSC	=	$640	F
Direct labor efficiency variance	=	(AQ-SQ)xSC	=	$3500	F

Direct materials efficiency variance = (AQ-SQ)xSC = (206000-(105000*2))*0.16 = -640 = $640 F

Direct labor efficiency variance = (AQ-SQ)xSC = (1600-(105000*0.02))*7 = -3500 = $3500 F

Part 2

		Formula		variance
VOH cost variance	=	Actual VOH – (SC x AQ)	=	$8000	F
VOH efficiency variance	=	(AQ-SQ)xSC	=	$19400	F

VOH cost variance = Actual VOH – (SC x AQ) = 8000-(1600*10) = -8000 = $8000 F

VOH efficiency variance=(AQ-SQ)xSC = (1600-(105000*0.02))*10 = -19400 = $19400 F

		Formula		variance
Fixed cost variance	=	Actual FOH - Budgeted FOH	=	$400	F
Fixed efficiency variance	=	Budgeted FOH - Allocated FOH	=	$3000	F

Fixed cost variance     =          Actual FOH - Budgeted FOH = 30000-30400 = -400 = $400 F

Fixed efficiency variance        =          Budgeted FOH - Allocated FOH = (1900*10)-(1600*10) =3000 F

Part 3

Unfavorable variance

Unfavorable variance