Question

Sweetwater Company manufactures two products, Mountain Mist and Valley Stream. The company prepares its master budget on the basis of standard costs The following data are for March: Mountain Mist Valley Stream Direct materials Direct labor Variable overhead (per direct labor-hour) Fixed overhead (per month) Expected activity (direct labor-hours) 3 ounces at $14.60 per ounce 5 hours at $60.40 per hour 548 $347 475 6.150 4 ounces at $16.90 per ounoe 6 hours at $79 per hour $52.90 $398,580 7,800 Actual results Direct material (purchased and used) Direct labor Variable overhead Fixed overhead Units produced (actual) 3.500 ounces at $13.90 per ounce 4,940 hours at $61.75 per hour $254550 $317.950 040 units 4,800 ounces at $18.25 per ounce 7.450 hours at $79.60 per hour 382,510 5396,100 1,240 units Required a. Compute a variance analysis for each variable cost for each product. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) Price Price Direct materials Direct labor Variable overhead b. Compute a fixed overhead variance analysis for each product. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) Stream Price Variance Price Variance Fixed overhead

Answer 1

a)		Mountain Mist				Valley stream
		Price Variance		Efficiency Variance		Price Variance		Efficiency Variance
	Direct Materials	2450	F	5548	U	6480	U	2704	F
		=-3500*(13.9-14.6)		=(3500-1040*3)*14.6		=4800*(18.25-16.9)		=-(4800-1240*4)*16.9
	Direct labor	6669	U	15704	F	4470	U	790	U
		=4940*(61.75-60.4)		=-(4940-1040*5)*60.4		=7450*(79.6-79)		=(7450-1240*6)*79
	Variable overhead	17430	U	5280	F	11595	F	790	U
		=254550-4940*48		=-(4940-1010*5)*48		=-(382510-7450*52.9)		=(7450-1240*6)*79
b)		Mountain Mist				Valley stream
		Price Variance		Production Volume Variance		Price Variance		Production Volume Variance
	Fixed overhead	29525	F	53675	U	2480	F	18396	U
		=-(317950-347475)		=347475-1040*5*347475/6150		=-396100+398580		=398580-1240*6*398580/7800