Sweetwater Company manufactures two products, Mountain Mist and Valley Stream. T
ID: 2404703 • 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
Given that
standard price of mountain mist = $14.8
standard price of valley stream = $17.2
actual price of mountain mist = $14.2
actual price of valley stream = $19
actual quantity of mountain mist = 3800
actual quantity of valley stream = 4700
standard quantity of mountain mist = 3 ounces * units produced
= 3*1070 =3210
standard quantity of valley stream =4*1220 = 4880
(a) computation of variance analysis sor each variable cost for each product
1) direct material cost variance =(standard quantity * standard price)-
(actual quantity*actual price)
2 ) direct labour cost variance =(standard hours*standard rate)-(actual hours*actual rate)
standard hours of mountain mist = hours * units produced
=5 * 1070
= 5350
standard hours of valley stream = 6*1220
= 7320
3) varience cost varience = standard variable cost per labour hour - actual variable cost
(b) compute a fixed overhead varience analysis for each product
fixed overhead variance = (standard cost - actual cost)
particulars standard qty standard price standard total actual qty actual price actual total direct material cost variance mountain mist 3210 14.8 47508 3800 14.2 53960 (6452) valley stream 4880 17.2 83936 4700 19 89300 (5364)Related Questions
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