Question

Zachary Manufacturing Company produces a component part of a top secret military communication device. Standard production and cost data for the part, Product X, follow:

Planned production		27,000	units
Per unit direct materials		1.90	pounds	@	$	2.10	per pound
Per unit direct labor		3.00	hours	@	$	8.90	per hour
Total estimated fixed overhead costs	$	610,200

Zachary purchased and used 53,840 pounds of material at an average cost of $2.13 per pound. Labor usage amounted to 79,030 hours at an average of $9.03 per hour. Actual production amounted to 27,500 units. Actual fixed overhead costs amounted to $642,200. The company completed and sold all inventory for $1,980,000.

Required

1. Prepare a materials variance information table showing the standard price, the actual price, the standard quantity, and the actual quantity.

2. Calculate the materials price and usage variances. Indicate whether the variances are favorable (F) or unfavorable (U).

3. Prepare a labor variance information table showing the standard price, the actual price, the standard hours, and the actual hours.

4. Calculate the labor price and usage variances. Indicate whether the variances are favorable (F) or unfavorable (U).

5. Calculate the predetermined overhead rate, assuming that Zachary uses the number of units as the allocation base.

6. Calculate the fixed cost spending and volume variances and indicate whether they are favorable (F) or unfavorable (U).

7. Determine the amount of gross margin Zachary would report on the year-end income statement.

Answer 1