You have a business manufacturing man buns for depilous hipster wannabes. You pr

Question

You have a business manufacturing man buns for depilous hipster wannabes. You produce these man-buns (MB) in batches of 100. Each MB hs the following manufacturing standards Direct materials 2 locks of hair $10.00 per lock Direct labor 1.5DLH $15.00 per DLH Indirect materials $300 per batch other indirect manufacturing costs $5000 per month Normal output 10 batches per month total capacity 11 batches per month There is no beginning or ending inventory for WIP and Finished Goods During april 2016 you made 11 batches of MB's and spend/incurred the following: Locks of hair 2310 locks $22,638 in total direct labor 1600 DLH $24,400 in total Variable OH(Indirect materials) $3150 in total Fixed O/H(other indirect mfg costs) $5220 in total 1. perpare an analysis of actual production costs for April compared to budget adjusted for output (Flex Budget). Identify the usage/efficiency, price/rate, spending, and volume variances as appropriate. 2. record journal entries to record the use of direct materials, direct labor, and variable and fixed manufacturing overhead. post costs to WIP first, then transfer all of WIP to Finished Goods to COGS- remember there is no beginning or ending inventory for WIP or Finished Goods.

Explanation / Answer

1.

Material usage variance = (Standard quantity to be used - Actual quantity used) Standard rate

= (2200 -2310) * $10

= $1100 U

Material Price Variance = (Standard Price - Actual Price) * Actual quantity used

= {$10 - (22638/2310)} * 2310

= $ 462 F

Labor rate variance = (Standard Rate - Actual Rate ) * Actual labor hrs worked

= ($15 - (24400/1600)} * 1600

= $400 U

Labor efficiency variance = (Standard labor hrs to be worked - actual labor hrs worked) * Standard Rate

=(1650 - 1600) * $15$750 F

Variable overhead variance = Standard Variable overhead - Actual Variable Overhead

= $3300 - $3150

= $150 F

Fixed overhead variance = Standard Fixed overhead - Actual fixed overhead

= $5000 - $5220

= $220 U

2)

Particulars Budget Actual Direct Material 2locks*100MB*11Batches @ $10 =$22000 22638 Direct Labor 1.5hrs*100MB*11batches @ $15 = $24750 24400 Variable overhead 11 batches @ $300 = $3300 $3150 Fixed overhead $5000 $5220

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