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Chapter 23: 13RQ (page 1305)
Question:List the direct labor variances, and briefly describe each.
Answer
The direct material variances can be in form of direct labor cost variance and direct labor efficiency variance
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Question:How is the fixed overhead volume variance different from the other variances?
Preparing a flexible budget computing standard cost variance
Morton Recliners manufactures leather recliners and uses flexible budgeting and a
standard cost system. Morton allocates overhead based on yards of direct materials.
The company鈥檚 performance report includes the following selected data:
Static Budget Actual Results (1,000 recliners) (980 recliners) |
Sale (1,000 recliners \(505 each) \) 505,000 (980 recliners \(480 each) \) 470,400 |
Variable Manufacturing Costs: Direct Materials (6,000 yds. @ \(8.60/yd.) 51,600 (6,143 yds. @ \)8.40/yd.) 51,601 Direct Labor (10,000 DLHr @ \(9.20/DLHr) 92,000 (9,600 DLHr @ \)9.30/DLHr) 89,280 Variable Overhead (6,000 yds. @ \(5.20/yd.) 31,200 (6,143 yds. @ \)6.60/yd.) 40,544 |
Fixed Manufacturing Costs: Fixed Overhead 60,600 62,600 Total Cost of Goods Sold 235,400 244,025 |
Gross Profit \( 269,600 \) 226,375 |
Requirements
1. Prepare a flexible budget based on the actual number of recliners sold.
2. Compute the cost variance and the efficiency variance for direct materials and for direct labor. For manufacturing overhead, compute the variable overhead cost,variable overhead efficiency, fixed overhead cost, and fixed overhead volume variances. Round to the nearest dollar.
3. Have Morton鈥檚 managers done a good job or a poor job controlling materials, labor, and overhead costs? Why?
4. Describe how Morton鈥檚 managers can benefit from the standard cost system.
Question:List the fixed overhead variances, and briefly describe each.
Marsh Company uses a standard cost system and reports the following information for 2018:
Standards:
3 yards of cloth per unit at \(1.05 per yard
2 direct labor hours per unit at \)10.50 per hour
Overhead allocated at \(5.00 per direct labor hour
Actual:
2,600 yards of cloth were purchased at \)1.10 per yard
Employees worked 1,800 hours and were paid \(10.00 per hour
Actual variable overhead was \)1,700
Actual fixed overhead was \(7,300
Direct materials cost variance \) 130 U
Direct materials efficiency variance 420 F
Direct labor cost variance 900 F
Direct labor efficiency variance 2,100 F
Variable overhead cost variance 1,500 U
Variable overhead efficiency variance 1,500 F
Fixed overhead cost variance 600 U
Fixed overhead volume variance 1,600 F
Marsh produced 1,000 units of finished product in 2018. Record the journal entries to record direct materials, direct labor, variable overhead, and fixed overhead, assuming all expenditures were on account and there were no beginning or ending balances in the inventory accounts (all materials purchased were used in production, and all goods produced were sold). Record the journal entries to record the transfer to Finished Goods Inventory and Cost of Goods Sold (omit the journal entry for Sales Revenue). Adjust the Manufacturing Overhead account
Question:How does the static budget affect the cost and efficiency variances?
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