Peaceful Corporation manufactures figurines based on the following information.
| Standard costs | $20 | |
| Materials (4 ounces at $5) | $8 | |
| Direct labor (1 hour per unit) | $4 | |
| Variable overhead (based on direct labor hours) | ||
| Fixed overhead budget | $19,000 | |
| Actual results and costs | ||
| Materials purchased | ||
| Units | 9,000 | |
| Cost | $39,600 | |
| Materials used in production | ||
| Finished product units | 2,000 | |
| Raw material (ounces) | 8,200 | |
| Direct labor hours | 2,000 | |
| Direct labor cost | $20,000 | |
| Variable overhead costs | $5,980 | |
| Fixed overhead costs | $19,500 |
Required:
- Prepare a performance report for Peaceful using the following headings.
- Actual Production Costs
- Flexible Budget Costs
- Flexible Budget Variances
- Compute the following variances (show calculations).
- Materials usage variance
- Labor rate variance
- Labor efficiency variance
- Variable overhead spending variance
- Variable overhead efficiency variance
- Fixed overhead budget variance
- Give one possible explanation for each of the six variances computed in part b.