Dante\'s Statue Company produces lawn statues. The standard cost of producing on
ID: 2472542 • Letter: D
Question
Dante's Statue Company produces lawn statues. The standard cost of producing one statue is:
Material (2.5 pounds × $2.80) $ 7.00
Labor (.75 hours × $12) 9.00
Overhead 10.00
Total $26.00
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Standard variable overhead is $6.20 per unit, and fixed annual overhead is $95,000. At the start of 2012, expected production was 25,000 units. During 2012, 27,000 statues were produced. The following information, related to actual costs incurred in 2012, is available:
1. Purchased 70,000 pounds of material for $182,000.
2. Used 68,200 pounds of material.
3. Worked 19,600 labor hours costing $254,800.
4. Actual overhead incurred was $260,000.
Required:
a. Show the calculation of the standard overhead rate per unit of $10.
b. Calculate all material, labor, and overhead variances.
c. Prepare a variance summary, and briefly comment on variances that should be investigated.
Explanation / Answer
Variable overhead
$6.20
Fixed overhead 95,000/25,000
3.80
total
$10.00
b) Material price variance = ( 2.80 *70,000 – 182,000)
=14,000(F)
Material Quantity variance = ( 2.5*27,000 - 68,200) 2.80
= 1,960 (U)
Direct labor price variance = ( 12* 19,600 - 254,800)
=19,600(U)
Direct labor efficiency variance = (.75*27,000 – 19,600) 12
= (20,250 – 19,600) 12
= 7,800 (F)
Controllable overhead variance = Actual overhead – flexible budget for actual production
= 260,000 – (27,000 *6.20 + 95,000)
=2,400 (F)
Overhead volume variance = Flexible budget for actual production – overhead applied
= 262,400 – (10 *27,000)
= 7,600 (U)
3)The material price variance is favorable since the actual cost is less than estimated but the quantity variance is unfavorable since more units are consumed than anticipated . similarly the actual price of labor is more but there is efficiency in working hence less hours consumed.
The controllable overhead is favorable , also this variance is controllable .
Variable overhead
$6.20
Fixed overhead 95,000/25,000
3.80
total
$10.00
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