Question

Flandro Company uses a standard cost system and sets its predetermined overhead rate on the basis of direct labor-hours. The following data are taken from the company’s planning budget for the current year:

Denominator activity (direct labor-hours)		12,000
Variable manufacturing overhead cost	$	37,200
Fixed manufacturing overhead cost	$	103,200

The standard cost card for the company’s only product is given below:

Variable manufacturing overhead cost Fixed manufacturing overhead cost 37,200 $103,200 The standard cost card for the company's only product is given below: Standarcd Quantity or Hours Standard Price or Rate Standard Cost Inputs Direct materials Direct labor Manufacturing overhead Total standard cost per unit 4 yards1.90 per yard 7.60 18.00 2, hours $ 9.00 per hour 2 hours11.70 per hour 49.00 During the year, the company produced 6,240 units of product and incurred the t Materials purchased, 39,600 yards at $1.85 per yard Materials used in production (in yards) Direct labor cost incurred, 13,000 hours at $8.00 per hour Variable manufacturing overhead cost incurred Fixed manufacturing overhead cost incurred $ 73,260 25,750 s 104,000 s 38,250 s 80,600

Required:

1. Create a new standard cost card that separates the variable manufacturing overhead per unit and the fixed manufacturing overhead per unit.

2. Compute the materials price and quantity variances. Also, compute the labor rate and efficiency variances.

3. Compute the variable overhead rate and efficiency variances. Also, compute the fixed overhead budget and volume variances.

Complete this question by entering your answers in the tabs below.

Answer 1

Answer

• All working forms part of the answer
• Requirement 1

Direct Materials	4	yards at	1.9	per yard	$       7.60
Direct Labor	2	DLHs	9	per DLH	$    18.00
variable manufacturing Overhead	2	DLHs	3.1 [37200 / 12000]	per DLH	$       6.20
Fixed manufacturing Overhead	2	DLHs	8.6 [103200/12000]	per DLH	$    17.20
Standard cost per unit					$    49.00

• Requirement 2

Answers along with working

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                        1.90	-	$                       1.85	)	x	25750
	1287.5
	Variance		$              1,287.50			Favourable-F

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	24960	-	25750	)	x	$                           1.90
	-1501
	Variance		$              1,501.00			Unfavourable-U

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                        9.00	-	$                       8.00	)	x	13000
	13000
	Variance		$            13,000.00			Favourable-F

Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	12480	-	13000	)	x	$                           9.00
	-4680
	Variance		$              4,680.00			Unfavourable-U

• Requirement 3

Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                        3.10	-	$                       2.94	)	x	13000
	2050
	Variance		$              2,050.00			Favourable-F

Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	12480	-	13000	)	x	$                           3.10
	-1612
	Variance		$              1,612.00			Unfavourable-U

Fixed Overhead Production Budget Variance
(	Budgeted Fixed Overhead	-	Actual Fixed Overhead incurred	)
(	$           103,200.00	-	$            80,600.00	)
	22600
	Variance		22600			Favourable-F

Fixed Overhead Production Volume Variance
(	Standard Fixed Overhead or Fixed Overhead absorbed	-	Budgeted Fixed Overhead	)
(	$           107,328.00	-	$          103,200.00	)
	4128
	Variance		4128			Favourable-F