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Chapter 23: Q3TI (page 1288)

Question:Tipton Company manufactures shirts. During June, Tipton made 1,200 shirts and gathered the following additional data:

Direct materials cost standard \(6.00 per yard of fabric

Direct materials efficiency standard 1.50 yards per shirt

Actual amount of fabric purchased and used 1,680 yards

Actual cost of fabric purchased and used \)10,500

Direct labor cost standard \(15.00 per DLHr

Direct labor efficiency standard 2.00 DLHr per shirt

Actual amount of direct labor hours 2,520 DLHr

Actual cost of direct labor \)36,540

Calculate the following variances:

7. Direct materials cost variance

8. Direct materials efficiency variance

9. Total direct materials variance

10. Direct labor cost variance

11. Direct labor efficiency variance

12. Total direct labor variance

Short Answer

Expert verified

Answer

7.The direct material cost variance is$420 U.

8.The direct material efficiency variance is $720 F

9. Total direct material variance is $300 F.

10.The direct labor cost variance is $420 U.

11.The direct labor efficiency variance is $1,800 U.

12. Total direct labor variance is$540 U

Step by step solution

01

Computation of direct material cost variance

Actualcostperyard=ActualcostoffabricpurchasedandusedActualquantityoffabricpurchasedandused=10,5001,680=$6.25peryard

Actual cost (AC) is $6.25.

Standard cost (SC) is $6.

Actual quantity (AQ) is 1,680

DirectMaterialCostVariance=AC-SC脳AQ=$6.25-$6脳1,680=$420U

02

Computation of direct material efficiency variance

StandardQuantity=Directmaterialsefficiencystandard脳Numberofshirtsproduced=1.5脳1,200=1,800shirtsDirectMaterialEfficiencyVariance=AQ-SQ脳SC=1,680-1,200脳1.5脳6=$720FTotaldirectMaterialVariance=DirectMaterialcostVariance+DirectMaterialEfficiencyVariance=420U+720F=$300

03

 Step 4 Computation of direct labor cost variance

Actualcostperdirectlaborhour=ActualcostofdirectlaborActualnumberofdirectlaborhours=36,5402,520=$14.50perDLHrDirectlaborcostvariance=AC-SC脳AQ=14.50-15.00脳2,520=$1,260

04

Computation of direct labor efficiency variance

StandardQuantity=Directlaborefficiencystandard脳Numberofshirtsproduced=2脳1,200=2,400DLHrDirectLaborefficiencyvariance=AQ-SQ脳SC=2,520-2,400脳15.00=$1,800U

05

Computation of Total direct labor variance

Totaldirectlaborvariance=Directlaborcostvariance+Directlaborefficiencyvariance=1,260F-1,800U=$540U

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Most popular questions from this chapter

Computing standard overhead allocation rates

The following information relates to Morgan, Inc.鈥檚 overhead costs for the month:

Static budget variable overhead

\(7,800

Static budget fixed overhead

\)3,900

Static budget direct labor hours

1,300 hours

Static budget number of units

5,200 units

Morgan allocates manufacturing overhead to production based on standard direct labor hours. Compute the standard variable overhead allocation rate and the standard fixed overhead allocation rate.

Matthews Fender, which uses a standard cost system, manufactured 20,000 boat fenders during 2018, using 143,000 square feet of extruded vinyl purchased at \(1.30 per square foot. Production required 400 direct labor hours that cost \)16.00 per hour. The direct materials standard was seven square feet of vinyl per fender, at a standard cost of \(1.35 per square foot. The labor standard was 0.028 direct labor hour per fender, at a standard cost of \)15.00 per hour.

Compute the cost and efficiency variances for direct materials and direct labor. Does the pattern of variances suggest Matthews Fender鈥檚 managers have been making tradeoffs? Explain.

Computing overhead variances

Refer to the Morgan, Inc. data in Short Exercise S23颅9. Last month, Morgan reported the following actual results: actual variable overhead, \(10,800; actual fixed overhead, \)2,770; actual production of 7,000 units at 0.20 direct labor hours per unit. The standard direct labor time is 0.25 direct labor hours per unit (1,300 static direct labor hours / 5,200 static units).

Requirements

1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.

2. Explain why the variances are favorable or unfavorable.

Question:How does the static budget affect the cost and efficiency variances?

Question: What are the two components of the static budget variance? How are they calculated?
See all solutions

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