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Its certainly is nice to see that small variance on the income statement after all the trouble we%u2019ve had lately in controlling manufacturing costs, said Linda White, vice president of Molina Company. %u201CThe $32,400 overall manufacturing variance reported last period is well below the 4% limit we have set for variances. We need to congratulate everybody on a job well done. |
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The company produces and sells a single product. The standard cost card for the product follows: |
| Standard Cost Card Per Unit | ||
| Direct materials, 4.00 yards at $3.40 per yard | $ | 13.60 |
| Direct labor, 2.5 direct labor hours at $12.00 per direct labor hour | 30.00 | |
| Variable overhead, 2.5 direct labor hours at $1.60 per direct labor hour | 4.00 | |
| Fixed overhead, 2.5 direct labor hours at $6.00 per direct labor hour | 15.00 | |
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| Standard cost per unit | $ | 62.60 |
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The following additional information is available for the year just completed: |
| a. | The company manufactured 25,000 units of product during the year. |
| b. |
A total of 97,000 yards of material was purchased during the year at a cost of $3.60 per yard. All of this material was used to manufacture the 25,000 units. There were no beginning or ending inventories for the year. |
| c. |
The company worked 66,000 direct labor hours during the year at a cost of $11.80 per hour. |
| d. |
Overhead cost is applied to products on the basis of standard direct labor hours. Data relating to manufacturing overhead costs follow: |
| Denominator activity level (direct labor hours) | 60,000 | |
| Budgeted fixed overhead costs | $ | 360,000 |
| Actual fixed overhead costs | $ | 357,200 |
| Actual variable overhead costs | $ | 112,200 |
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| Required: | |
| 1. |
Compute the direct materials price and quantity variances for the year. (Input all amounts as positive values. Leave no cells blank be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Omit the “$” sign in your response.) |
| Direct materials quantity variance | $ | (Click to select) F U None |
| Direct materials price variance | $ | (Click to select) F U None |
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| 2. |
Compute the direct labor rate and efficiency variances for the year. (Input all amounts as positive values. Leave no cells blank be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Omit the “$” sign in your response.) |
| Direct labor efficiency variance | $ | (Click to select) F U None |
| Direct labor rate variance | $ | (Click to select) F U None |
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| 3. | For manufacturing overhead, compute the following: |
| a. |
The variable overhead rate and efficiency variances for the year. (Input all amounts as positive values. Leave no cells blank be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Omit the “$” sign in your response.) |
| Efficiency variance | $ | (Click to select) F U None |
| Rate variance | $ | (Click to select) F U None |
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| b. |
The fixed overhead budget and volume variances for the year. (Input all amounts as positive values. Leave no cells blank be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Omit the “$” sign in your response.) |
| Volume variance | $ | (Click to select) F U None |
| Budget variance | $ | (Click to select) F U None |