Sweetwater Company manufactures two products, Mountain Mist and Valley Stream. T
ID: 2404133 • Letter: S
Question
Sweetwater Company manufactures two products, Mountain Mist and Valley Stream. The company prepares its master budget on the basis of standard costs. The following data are for March:
Standards Mountain Mist Valley Stream
Direct materials 3 ounces at $14.80 per ounce 4 ounces at $17.20 per ounce
Direct labor 5 hours at $60.20 per hour 6 hours at $78 per hour
Variable overhead (per direct labor-hour) $48 $53.20
Fixed overhead (per month) $364,425 $399,360
Expected activity (direct labor-hours) 6,450 7,800
Actual results
Direct material (purchased and used) 3,800 ounces at $14.20 per ounce 4,700 ounces at $19.00 per ounce
Direct labor 4,970 hours at $62.50 per hour 7,480 hours at $82.60 per hour
Variable overhead $257,550 $385,510
Fixed overhead $323,950 $399,100
Units produced (actual) 1,070 units 1,220 units
Required:
a. Compute a variance analysis for each variable cost for each product. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
b. Compute a fixed overhead variance analysis for each product. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
Explanation / Answer
a. Compute a variance analysis for each variable cost for each product.
1.Direct material cost variance
=Standard Qty required for actual production * Standard price-Actual Qty*Actual price
Standard
Qty
Standard
Pice
Standard
Total
Actual
Qty
Actual
Price
Actual
Total
Variance
Analysis
=1070*3
=3210
=1220*4
=4880
2.Direct Labour cost variance
=Standard hours required for actual production*Standard rate - Actual Qty*Actual price
Standard
hours
Standard
rate
Actual
hours
Actual
Rate
=1070*5
=5350
=1220*6
=7320
3.Variable cost variance.
=Standard variable Cost per labour hour- Actual variable Cost
Standard
labour hours
Standard
Rate
Total Standard
variable Cost
Actual
variable cost
=1070 units*5
=5350
=1220 units*6
=7320
b. Compute a fixed overhead variance analysis for each product
Standard
cost
Actual
Cost
PurticulersStandard
Qty
Standard
Pice
Standard
Total
Actual
Qty
Actual
Price
Actual
Total
Variance
Analysis
A B (C=A*B) D E (F=D*E) (G=C-F) Mountain Mist=1070*3
=3210
$14.8 $47,508 3800 $14.2 $53960 $6452(U) Valley Stream=1220*4
=4880
$17.2 $83936 4700 $19 $89300 $5364(U)Related Questions
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