Question

Wonderfull Not only did our salespeople do a good job in meeting the sales budget this year. but our production people did a good job in controlling costs as well said Kim Clark, president of Martell Company. "Our $48,950 overall manufacturing cost variance is only 1.6% of the $3.059.375 standard cost of products made during the year. That's welll within the 3 % parameter set by management for acceptable variances. It looks like everyone will be in line for a bonus this year." The company produces and sells a single product The standard cost card for the product follows: (1) Standard Quantity or Hours 3.5e feet 2.7 hours (2) Standard Price or Rate Standard Cost (1) (2) $ 11.20 Iaputs Direct saterials Direct labor Variable overhead Fixed overhead $3.20 per foot 1e per hour S2.60 per hour 5.ee per hour 27.00 2.7 hours 2.7 hours 7.02 13.58 Total standard cost per unit s 58.72 The following additional information is available for the year just completed: a. The company manufactured 30,000 units of product during the year b. A total of 103.000 feet of material was purchased during the year at a Cost of $3.45 per foot. All of this material was used to manufacture the 30,000 units produced. There were no beginning of ending inventories for the year C The company worked 83,000 direct labor-hours during the year at a direct iabor cost of $9.90 per hour d. Overhead is applied to products on the bass of standard direct lapor-hours Data re ating to manufacturing overhead costs foillow Denoninator activity level (cirect 1abor-Nours) sudgeted fixed overhead costs Actual vaniable overhesd costs incurred Actual fixced overhead costs incurred Be.e S224 18 S396.see Required: Compute the materiels orice and quantity variances forthe year 2 Compute the lsboritate and efficlency variances for the yes Fotmanufacturing overneBc compute Elhe venabie overhead rate ane efficlency variances oneyear OEThexed ovetnead o.dget and volumevariances o1ne e For all requlrements Indlcate the effeet of each varlence by selecting "F" for favorable. "U for unfavorable. and effect .e. zerovarlencel.inout ollemounts os positive values None for no

Answer 1

Direct Material			in $
Price Variance A	(AQ*Ap)-(AQ*SP)	(103000*3.45)-(103000*3.2)	25750	U
Efficiency variance B	SP*(AQ-SQ allowed)	3.2*(103000-(30000*3.5))	6400	F
Ans 2
Direct labor
Price Variance D	(AH*Ap)-(AH*SP)	(83000*9)-(83000*10)	83000	F
Efficiency variance C	SP*(AH-SH allowed)	10*(83000-(30000*2.7))	20000	U
ans 3
Variable overhead
Price Variance E	(AH*AVO)-(AH*SVO)	224100-(83000*2.6)	8300	U
Efficiency variance F	SVO*(AH-SH allowed)	2.6*(83000-(30000*2.7))	5200	U
Fixed overhead variance
Budget variance	Actual-Budget	396600-400000	3400	F
Volume Variance	Budget-Applied Overhead	400000-(400000/80000*30000)	250000	U
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