Question

In: Accounting

Victory for MSU, Inc. manufactures huge MSU flags for tailgating. The company uses a standard costing...

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:

Solutions

Expert Solution

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


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