VonMeter Company manufactures snow tires. The following information is available

Question

VonMeter Company manufactures snow tires. The following information is available for the last operating period. VonMeter produced and sold 41,000 tires for $52 each. Budgeted production was 45,000 tires. -Standard variable costs per tire follow Direct materials: 4 pounds at 53.50 Direct labor:.75 hours at $16.00 Variable production overhead:.10 machine-hours at 315 per hour 14.00 12.00 1.50 Total variable costs 27.50 . Fixed production overhead costs Monthly budget1 1,350,00 . Fixed overhead is applied at the rate of $30 per tire. .Actual production costs Direct materials purchased and used: 175,000 pounds at $3.20 Direct labor: 28.500 hours at 316.30 Variable overhead: 5.000 machine-hours at S15.70 per hour Fixed overhead 560,000 464.550 78.500 1,425,000 Required: You may want to refer to the Examples posted for this chapter in Connect for formats and examples. (a) Prepare the cost variance analysis for each variable cost for VonMeter by calculating the total DM variance (PriceEfficiency), the total DL variance (PriceEfficiency) and total Variable Overhead variance (Spending or Price Production Volume) Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Direct materials Direct labor Variable overhead (b) Prepare the foxed overhead cost variance analysis by calculating the total Fixed Overhead variance (Price Variance Production Volume Variance. (Indicate the effect ofthe variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Explanation / Answer

Material Price variance (Actual Unit Cost - Standard unit cost)*Actual quantity purchased (3.20-3.50)*175000 -52500 F Material Efficiency Variance (Actual Unit usage- Standard unit usage)*standard cost per unit (175000-164000)*3.50 38500 U Budgeted usuage 4*41000 164000 Total Direct Material variance = 52500-38500 14000 F Direct Labor Variance Price Variance (Standard Rate - Actual Rate)*Actual hours (16-16.30)*28500 -8550 U Efficiency Variance (Actual labor hour usage - Standard labor hour usage)*Standard cost (28500-30750)*16 -36000 F Budgeted direct labor hours 0.75*41000 30750 Total Direct Labor Variance = 36000-8550 27450 F Variable Overhead Variance Price (Standard Rate - Actual Rate)*Actual Machine hours (15-15.70)*5000 -3500 U Volume (Actual machine hour usage - Standard machine hour usage)*Standard cost (5000-4100)*15 13500 U Standard machine hour 0.10*41000 4100 Total Variable overhead variance = 3500+13500 17000 F Fixed overhead variance Price overhead variance = (Actual - Budgeted) (1425000-1350000) 75000 U Volume overhead variance (Actual output*Fixed absorption rate)-(Budgeted output*Fixed absorption rate) (41000*30)-(45000*30) -120000 U Total Fixed overhead variance = 75000+120000 195000

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