Carlsbad Company has set the following standard costs per unit for the product it manufactures.
|
Direct materials (40 oz. @ $0.75 per oz.) |
$ 30.00 |
|
Direct labor (2 hr. @ $20 per hr.) |
40.00 |
|
Overhead (2 hr. @ $53.50 per hr.) |
107.00 |
|
Total standard cost |
$177.00 |
The predetermined overhead rate is based on a planned operating volume of 60% of the productive capacity of 3,000 units per month. The following flexible budget information is available.
|
|
Operating Levels |
||
|
|
50% |
60% |
70% |
|
Production in units |
1,500 |
1,800 |
2,100 |
|
Standard direct labor hours |
3,000 |
3,600 |
4,200 |
|
Budgeted overhead |
|
|
|
|
Variable overhead costs |
|
|
|
|
Indirect materials |
$ 18,000 |
$21,600 |
$25,200 |
|
Indirect labor |
10,500 |
12,600 |
14,700 |
|
Power |
7,500 |
9,000 |
10,500 |
|
Maintenance |
4,500 |
5,400 |
6,300 |
|
Total variable costs |
40,500 |
48,600 |
56,700 |
|
Fixed overhead costs |
|
|
|
|
Rent of factory building |
48,000 |
48,000 |
48,000 |
|
Depreciation—machinery |
44,000 |
44,000 |
44,000 |
|
|
20,000 |
20,000 |
20,000 |
|
Taxes and insurance |
32,000 |
32,000 |
32,000 |
|
Supervisory salaries |
144,000 |
144,000 |
144,000 |
|
Total fixed costs |
$184,500 |
$192,600 |
$200,700 |
During March, the company operated at 70% of capacity and produced 2,100 units, incurring the following actual costs.
|
Direct materials (88,000 oz. @ $0.70 per oz.) |
|
$ 61,600 |
|
Direct labor (4,000 hrs. @ $19.50 per hr.) |
|
78,000 |
|
Overhead costs |
|
|
|
Indirect materials |
$23,600 |
|
|
Indirect labor |
14,800 |
|
|
Power |
10,000 |
|
|
Maintenance |
3,200 |
|
|
Rent of factory building |
48,000 |
|
|
Depreciation—machinery |
44,000 |
|
|
Taxes and insurance |
24,000 |
|
|
Supervisory salaries |
31,600 |
199,200 |
|
Total costs |
|
$338,800 |
Required
1. Compute the direct materials cost variance, including its price and quantity variances.
2. Compute the direct labor variance, including its rate and efficiency variances.
3. Compute these variances: (a) variable overhead spending and efficiency, (b) fixed overhead spending and volume, and (c) total overhead controllable.
4. Prepare a detailed overhead variance report (as in Exhibit 24.15) that shows the variances for individual items of overhead.