Question

If you could show work it would be greatly appreciated also, if possible use the template that I have provided. Thank you, also this is all the question provides me with.

SallyMay, Inc., designs and manufactures T-shirts. It sells its T-shirts to brand name clothes retailers in lots of one dozen. SallyMay's May 2013 static budget and actual results for direct inputs are as follows:

Static Budget
Number of T-shirt lots (1 lot1 dozen) 400

Per Lot of T-shirts:
Direct materials 14 meters at $1.70 per meter$23.80
Direct manufacturing labor 1.6 hours at $8.10 per hour $12.96

Actual Results
Number of T-shirt lots sold 450

Total Direct Inputs:
Direct materials 6,840 meters at $1.95 per meter = $13,338
Direct manufacturing labor 675 hours at $8.20 per hour = $5,535

SallyMay has a policy of analyzing all input variances when they add up to more than 10% of the total cost of materials and labor in the flexible budget, and this is true in May 2013. The production manager discusses the sources of the variances: "A new type of material was purchased in May. This led to faster cutting and sewing, but the workers used more material than usual as they learned to work with it. For now, the standards are fine."

Calculate the direct materials and direct manufacturing labor price and efficiency variances in May 2013. What is the total flexible-budget variance for both inputs (direct materials and direct manufacturing labor) combined? What percentage is this variance of the total cost of direct materials and direct manufacturing labor in the flexible budget?

Sally King, the CEO, is concerned about the input variances. But she likes the quality and feel of the new material and agrees to use it for one more year. In May 2014, SallyMay again produces 450 lots of T-shirts. Relative to May 2013, 2% less direct material is used, direct material price is down 5%, and 2% less direct manufacturing labor is used. Labor price has remained the same as in May 2013. Calculate the direct materials and direct manufacturing labor price and efficiency variances in May 2014. What is the total flexible-budget variance for both inputs (direct materials and direct manufacturing labor) combined? What percentage is this variance of the total cost of direct materials and direct manufacturing labor in the flexible budget?

Comment on the May 2014 results. Would you continue the "experiment" of using the new material?

4-variance analysis, fill in the blanks.
	Variable	U/F	Fixed	U/F
1. Spending variance
2. Efficiency variance
3. Production-volume variance
4. Flexible-budget variance
5. Underallocated (overallocated) MOH
You can use the worksheet below to calculate the variances for the above table
			Flexible Budget:	Allocated:
			Budgeted Input Qty.	Budgeted Input Qty.
			Allowed for	Allowed for
	Actual Costs	Actual Input Qty.	Actual Output	Actual Output
	Incurred	× Budgeted Rate	× Budgeted Rate	× Budgeted Rate
Variable Manufacturing Overhead
Spending variance
Efficiency Variance
Never a Variance
Flexible-budget variance
Never a Variance
Overallocated Variable Overhead
			Flexible Budget:
		Same Budgeted	Same Budgeted	Allocated:
		Lump Sum	Lump Sum	Budgeted Input Qty.
		(as in Static Budget)	(as in Static Budget)	Allowed for
		Regardless of	Regardless of	Actual Output
	Actual Costs Incurred	Output Level	Output Level	× Budgeted Rate
Fixed Manufacturing Overhead
Spending variance
Never a Variance
Production volume Variance
Flexible-budget variance
Production volume Variance
Underallocated fixed Overhead

Answer 1

1.

May-13	Actual	Price		Actual Quantity	Efficiency Variance		Flexible Budget
	Results	Variance		Budgeted Price
	(1)	(2) = (1)–(3)		(3)	(4) = (3) – (5)		(5)
Units	450						450
Direct materials	$13,338	$1,710	U	$11,628a	$918	U	$10,710b
Direct labor	$5,535	$67.50	U	$ 5,467.50c	$297	F	$5,832d
Total price variance		$1,777.50	U
Total efficiency variance					$1,215	U

Working Notes

a 6,840 meters

$1.70 per meter = $11,628

b450 lots

14 meters per lot

$1.70 per meter = $10,710

c 675 hours

$8.10 per hour = $5,467.50

d 450 lots

1.6 hours per lot

$8.10 per hour = $5,832

Total flexible-budget variance for both inputs = $1,777.50U + $1,215U = $2,992.50U

Total flexible-budget cost of direct materials and direct labor = $10,710 + $5,832 = $16,542

Total flexible-budget variance as % of total flexible-budget costs = $2,992.50

$16,542 = 18.10% 2. May Actual Results Price Actual Quantity Efficiency Flexible Budget 2014 Variance Budgeted Price Variance             (1) (2) = (1) – (3)                         (3) (4) = (3) – (5)                           (5) Units 450 450 Direct materials $12,417.68a $1,022.24 U $11,395.44b $685.44 U $10,710c Direct manuf. labor $5,424.30d $66.15 U $5,358.15e $473.85 F $5,832c Total price variance $1,088.39 U Total efficiency variance $211.59 U

Working Notes:-

a Actual dir. mat. cost, May 2014 = Actual dir. mat. cost, May 2013

0.98

0.95 = $

0.98

0.95 = $12,417.68

Alternatively, actual dir. mat. cost, May 2013

= (Actual dir. mat. quantity used in May 2013

0.98)

(Actual dir. mat. price in May 2013

0.95)

= (6,840 meters

0.98)

($1.95/meter

0.95)

= 6,703.20

$1.8525 = $12,417.68

b (6,840 meters

0.98)

$1.70 per meter = $11,395.44

c Unchanged from 2013.

d Actual dir. labor cost, May 2014 = Actual dir. manuf. cost May 2013

0.98 = $

0.98 = $

Alternatively, actual dir. labor cost, May 2010

= (Actual dir. manuf. labor quantity used in May 2013

0.98)

Actual dir. labor price in 2013

= (675 hours

0.98)

$8.20 per hour

= 661.50 hours

$8.20 per hour = $5,424.30

e (675 hours

0.98)

$8.10 per hour = $5,358.15

3. The production manager indicated that efficiency has been improved. However the overall variances are still over 7% of the flexible input budgets. Sally should continue to use the new material due to its quality and feel. However she should re-examine the standard material prices because they’re not likely to lower the price of the new material in the future. Sally should also continue reducing the direct materials and labor costs because that’s a good thing for the company.