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Chapter 23: Q11RQ (page 1305)
Question:How does the static budget affect the cost and efficiency variances?
Answer
The cost and efficiency variances are not affected by the static budget prepared by the company's management
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Martin, Inc. is a manufacturer of lead crystal glasses. The standard direct materialsquantity is 1.0 pound per glass at a cost of \(0.50 per pound. The actual result for onemonth鈥檚 production of 6,500 glasses was 1.2 pounds per glass, at a cost of \)0.30 perpound. Calculate the direct materials cost variance and the direct materials efficiencyvariance.
Headset manufactures headphone cases. During September 2018, the company produced 106,000 cases and recorded the following cost data:
Standard Cost Information
Quantity | Cost | |
Direct Materials | 2 parts | \( 0.16 per part |
Direct Labor | 0.02 hours | 8.00 per hour |
Variable Manufacturing Overhead | 0.02 hours | 11.00 per hour |
| Fixed Manufacturing Overhead (\)30,720 for static budget volume of 96,000 units and 1,920 hours, or \(16 per hour) | ||
Actual Information
Direct Materials (209,000 parts @ \)0.21 per part) \( 43,890 Direct Labor(1,620 hours @ \)8.10 per hour) 13,122 Variable Manufacturing Overhead 9,000 Fixed Manufacturing Overhead 30,000 |
Requirements
1. Compute the cost and efficiency variances for direct materials and direct labor.
2.For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances.
3. Headset鈥檚 management used better颅quality materials during September. Discuss the trade颅off between the two direct material variances.
Office Plus sells its main product, ergonomic mouse pads, for \(13 each. Its variable cost is \)5.10 per pad. Fixed costs are \(205,000 per month for volumes up to 65,000 pads. Above 65,000 pads, monthly fixed costs are \)250,000. Prepare a monthly flexible budget for the product, showing sales revenue, variable costs, fixed costs, and operating income for volume levels of 45,000, 55,000, and 75,000 pads.
Explain the difference between a favorable and an unfavorable variance.
Question:List the fixed overhead variances, and briefly describe each.
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