Question

8-34 Question Help - X Data Table Eric Will manufac hanufactures expensive brasss doorknobs. DDC uses two direct-cost categories: direct materials and d age. Therefore, DDC allocates manufacturing overhead to production based upon pounds of materials (Clic X At the beginning of 2017, DDC budgeted annual production of 420,000 doorknobs and adopted the following standards for each doorknob: Data Table Read the Input Cost/Doorknob Require or unfavorabl 0.3 lb. $10/lb. Direct materials (brass) 3.00 Actual results for April 2017 were as follows 1.2 hours @ $17/hour 20.40 Before c Direct manufacturing labon aterials. Production 29.000 doorknobs Manufacturing overhead: 12.400 lb, at $11/lb Direct materials purchased $5/lb x 0.3 lb. 1.50 Variable Direct materials used 8,500 lbs. 4.50 Fixed $15/lb, x 0.3 lb. Direct manufacturing labor 29,200 hours for $671,600 29.40 $65.100 Variable manufacturing overhead Standard cost per doorknob Fixed manufacturing overhead $158,000 Direct m Print Done Print Done Enter any number in the edit fields and then click Check Answer E8-34 (book/static) Question Help Eric Williams is a cost accountant and business analyst for Diamond Design Company (DDC), which manufactures expensive brass doorknobs. DDC uses two direct-cost categories: direct materials and direct manufacturing labor. Williams feels that manufacturing overhead is most closely related to material usage. Therefore, DDC allocates manufacturing overhead to production based upon pounds of materials used. EE(Click the icon to view the standards.) (Click the icon to view the actual results for April.) iRequirements Read the reguirements Requirement 1. For the month of April, compute the variances, indicating whether each is favorable (F) or unfavorable the following variances, indicating whether each is 1. Before computing the variances complete the tables below. Begin by completing the table for direct materals. favorable (E) or unfavorable (U) a. Direct materials price variance (based purchases) Actual Input Qty. b. Direct materials efficiency variance c. Direct manufacturing labor price variance Variable manutactuding.overbead spending variance Actual Costs Budgeted Price Flexible f. Variable man ufacturing overhead efficiency variance g. Production-volume variance h. Fixed manufacturing overhead spending variance Incurred Purchases Usage Budget Direct materials 2. Can Williams use any of the variances to help explain any of the other variances? Give examples. Enter any number in the edit fields and then click Check Answer. Print Done

Answer 1

1.

a.	Direct Material Price Variance	$ ( 10.00 - 11.00 ) x 12,400 lbs.	$ 12,400 U
b.	Direct Materials Efficiency Variance	( 29,000 x 0.30 - 8,500) lbs. x $ 10.00	2,000 F
c.	Direct Manufacturing Labor Price Variance	$ ( 17.00 - 23.00) x 29,200 hours	175,200 U
d.	Direct Manufacturing Labor Efficiency Variance	( 29,000 x 1.20 - 29,200) hours x $ 17	95,200 F
e.	Variable Manufacturing Overhead Spending Variance	( 8,500 x $ 5 - $ 65,100)	22,600 U
f.	Variable Manufacturing Overhead Efficiency Variance	( 29,000 x 0.30 - 8,500) x $ 5	1,000 F
g.	Production Volume Variance	( 29,000 x 0.30 x $ 15 ) - $ 157,500	27,000 U
h.	Fixed Manufacturing Overhead Spending Variance	[ 420,000 x 0.30 x $ 15 ] / 12 - $ 158,000	500 U

2. Direct materials efficiency variance is favorable. It is therefore expected that variable manufacturing overhead efficiency variance would also be favorable, as variable MOH varies with materials used.