Sweetwater Company manufactures two products, Mountain Mist and Valley Stream. T
ID: 2406141 • 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: Direct materials Direct labor Variable overhead (per direct labor-hour) Fixed overhead (per month) Expected activity (direct labor-hours) 3 ounces at $14.60 per ounce 5 hours at $60.40 per hour 548 5370.640 6.560 4 ounces at $17.20 per ounce 6 hours at $80 per hour $53.40 $399,360 7,800 Actual results Direct material (purchased and used) Direct labor Variable overhead Fixed overhead Units produced (actual) 4,000 ounces at $14.40 per ounce 4,990 hours at $63.00 per hour 5263.550 $325.950 1,090 units 4500 ounces at $19.50 per ounce 7,500 hours at $8460 per hour $387,510 $399,300 1.240 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.) Direct materials Direct labor 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.) Price Variance Price Variance Foued overheadExplanation / Answer
Answer to a
Price varaince = (Actual unit cost - Standard unit cost) X Actual quantity purchased
Effeciency variance = (Actual quantity - Budgeted quantity) X Standard price
Budgeted quanity = Expected activity/ Standard labour hours per unit X Ounces per hour
Mountain Mist = 6560/5X3=3936
Valley stream = 7800/6X4=5200
Actual unit cost = Variable overhead/ actual hours
Mountain mist = 263550/4990=52.82
Valley stream = 387510/7500=51.67
Mountain mist Mountain Mist Valley stream Valley stream Remarks Price variance Effeciency variance Price variance Efficiency variance Direct material (14.4-14.6)*(4000) (4000-3936)*14.6 (19.5-17.2)*(4500) (4500-5200)*17.2Budgeted quanity = Expected activity/ Standard labour hours per unit X Ounces per hour
Mountain Mist = 6560/5X3=3936
Valley stream = 7800/6X4=5200
Direct labour (63-60.4)*(4990) (4990-6560)*60.4 (84.6-80)*(7500) (7500-7800)*80 Variable o/h (52.82-48)*4990 (4990-6560)*48 (51.67-53.4)*7500 (7500-7800)*53.4Actual unit cost = Variable overhead/ actual hours
Mountain mist = 263550/4990=52.82
Valley stream = 387510/7500=51.67
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