In: Accounting
Victory for MSU, Inc. manufactures huge MSU flags for
tailgating. The company uses a standard costing system and applies
overhead on the basis of direct labor hours. Victory provides the
following information about this product:
Standards: |
Direct material 18.0 yards of material per flag at $12.80 per yard |
Direct labor 3.0 hours per flag at $10.60 per hour |
Variable manufacturing overhead (MOH) standard rate $4.00 per direct labor hour |
Predetermined fixed MOH standard rate $11.00 per direct labor hour |
Total budgeted fixed MOH cost $81,600 |
Actual cost data from the most recent month: |
Purchased 43,400 yards of material at a total cost of $647,300 |
Used 38,900 yards of material in producing 2,000 flags |
Actual direct labor cost of $81,280 for a total of 8,920 hours |
Actual variable MOH cost $44,629 |
Actual fixed MOH cost $79,300 |
Carry your answers to four decimal places.
1. Calculate direct material variances. Enter as a positive if favorable and negative if unfavorable.
a. Direct material price variance: $-91,780.00
b. Direct material quantity variance: $-37,120.00
2. Calculate direct labor variances. Enter as a positive if favorable and a negative if unfavorable.
a. Direct labor rate variance: $13,272.00
b. Direct labor efficiency variance: $-30,952.00
3. Calculate variable manufacturing overhead (MOH) variances. Enter as a positive if favorable and negative if unfavorable.
a. Variable MOH rate variance:
b. Variable MOH efficiency variance:
4. Calculate fixed manufacturing overhead (MOH) variances. Enter as a positive if favorable and negative if unfavorable.
a. Fixed overhead budget variance:
b. Fixed overhead volume variance:
Ans 1: Direct Material variance = Direct material price variance + Direct material quantity variance
= -91,780.00 + -37,120.00 = $ -128900.
Ans 2: Direct labor variance = Direct labor rate variance + Direct labor efficiency variance
= 13,272.00 + -30,952.00 = $-17680.
Ans 3 a) Variable MOH rate variance = (Standard variable MOH rate* Actual Hours) - Actual variable MOH
= 4*8920 - 44629 = $-8949.
Ans 3 b) Variable MOH efficiency variance = Standard overhead
rate x (Actual hours - Standard hours)
= 4 * (8920- 6000) = $11680
Ans 4 a. Fixed overhead budget variance= Budgeted Fixed Overhead - Actual Fixed Overhead
= 81600- 79300 = $2300
Ans 4 b):
Fixed Overhead Volume Variance | = | Absorbed Fixed overheads | - | Budgeted Fixed Overheads |
= | Actual Output x FOAR* | - | Budgeted Output x FOAR* |
* Fixed Overhead Absorption Rate per unit of output
=(2000*33) - (2473*33) = $-15600.
Working note : Calculation of FOAR & Budgeted output:
Total budgeted Hours= Total budgeted fixed MOH cost / Predetermined fixed MOH standard rate
=81600/11 = 7418 hours
Budgeted output = Budgeted Hours / Per labor hour
=7418/3 = 2473 flags
FOAR = 81600/2473 = $33