Question

Ceradyne Products operates a small plant in New Mexico that produces dog food in batches of 1,500 pounds. The product sells for $6 per pound. Standard costs for 2021 are:

Standard direct labor cost = $15 per hour
Standard direct labor hours per batch = 10 hours
Standard price of material A = $0.35 per pound
Standard pounds of material A per batch = 744 pounds
Standard price of material B = $0.55 per pound
Standard pounds of material B per batch = 270 pounds
Fixed overhead cost per batch = $460

At the start of 2021, the company estimated monthly production and sales of 49 batches. The company estimated that all overhead costs were fixed and amounted to $25,000 per month. During the month of June 2021 (typically a somewhat slow month), 38 batches were produced (not an unusual level of production for June). The following costs were incurred:

Direct labor costs were $7,490 for 460 hours.
40,900 pounds of material A costing $8,589 were purchased and used.
11,800 pounds of material B costing $5,900 were purchased and used.
Fixed overhead of $22,200 was incurred.

Calculate variances for material, labor, and overhead. (Round intermediate calculations to 2 decimal places, e.g. 1.62 and final answers to 0 decimal places, e.g. 125. Enter all variances as a positive number.)

Material Price Variance (Material A)			$		select an option: Unfavorable; Favorable; Neither Unfavorable nor Favorable
Material Price Variance (Material B)			$		select an option: Unfavorable; Favorable; Neither Unfavorable nor Favorable
Material Quantity Variance (Material A)			$		select an option: Unfavorable; Favorable; Neither Unfavorable nor Favorable
Material Quantity Variance (Material B)			$		select an option: Unfavorable; Favorable; Neither Unfavorable nor Favorable
Labor Rate Variance			$		select an option: Unfavorable; Favorable; Neither Unfavorable nor Favorable
Labor Efficiency Variance			$		select an option: Unfavorable; Favorable; Neither Unfavorable nor Favorable
Controllable Overhead Variance			$		select an option: Unfavorable; Favorable; Neither Unfavorable nor Favorable
Overhead Volume Variance			$		select an option: Unfavorable; Favorable; Neither Unfavorable nor Favorable

Prepare a summary of the variances. (Enter unfavorable variances using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Material Price Variance (Material A)			$
Material Price Variance (Material B)			$
Material Quantity Variance (Material A)			$
Material Quantity Variance (Material B)			$
Labor Rate Variance			$
Labor Efficiency Variance			$
Controllable Overhead Variance			$
Overhead Volume Variance			$
	Total		$

Does the unfavorable overhead volume variance suggest that overhead costs are out of control?

The overhead volume variance (Does suggest OR does not suggest) that overhead costs are out of control.

Can you please help with the above problem and please show your steps in detail. Thanks!

Answer 1

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