In: Accounting
Sheffield, Ltd. manufactures shirts, which it sells to customers
for embroidering with various slogans and emblems. The standard
cost card for the shirts is as follows.
Standard Price | Standard Quantity | Standard Cost | ||||||
Direct materials | $4 per yard | 1.50 | yards | $6.00 | ||||
Direct labor | $12 per DLH | 0.50 | DLH | 6.00 | ||||
Variable overhead | $4 per DLH | 0.50 | DLH | 2.00 | ||||
Fixed overhead | $6 per DLH | 0.50 | DLH | 3.00 | ||||
$17.00 |
Sandy Robison, operations manager, was reviewing the results for
November when he became upset by the unfavorable variances he was
seeing. In an attempt to understand what had happened, Sandy asked
CFO Suzy Summers for more information. She provided the following
overhead budgets, along with the actual results for November.
The company purchased and used 80,100 yards of fabric during the
month. Fabric purchases during the month were made at $3.90 per
yard. The direct labor payroll ran $314,825, with an actual hourly
rate of $12.25 per direct labor hour. The annual budgets were based
on the production of 45,000 shirts, using 251,000 direct labor
hours. Though the budget for November was based on 49,100 shirts,
the company actually produced 51,100 shirts during the
month.
Variable Overhead Budget | |||||||
Annual Budget | Per Shirt | November—Actual | |||||
Indirect material | $446,000 | $0.90 | $48,700 | ||||
Indirect labor | 304,000 | 0.60 | 31,100 | ||||
Equipment repair | 195,000 | 0.40 | 20,800 | ||||
Equipment power | 54,000 | 0.10 | 7,500 | ||||
Total | $999,000 | $2.00 | $108,100 |
Fixed Overhead Budget | |||||
Annual Budget | November—Actual | ||||
Supervisory salaries | $259,000 | $21,400 | |||
Insurance | 345,000 | 27,800 | |||
Property taxes | 84,000 | 6,800 | |||
Depreciation | 321,000 | 25,500 | |||
Utilities | 213,000 | 20,000 | |||
Quality inspection | 281,000 | 25,300 | |||
Total | $1,503,000 | $126,800 |
A. Calculate the direct materials price and quantity variances for November.
B. Calculate the direct labor rate and efficiency variances for November.
C. Calculate the variable overhead spending and efficiency variances for November.
D. Calculate the fixed overhead spending variance for November.