Panache Clothiers is a small company that manufactures tall-men\'s suits. The co
ID: 2479162 • Letter: P
Question
Panache Clothiers is a small company that manufactures tall-men's suits. The company has used a standard cost system. In May 2012, 11,200 suits were produced. The following standard and actual cost data applied to the month of May when normal capacity was 16,280 direct labor hours. All materials purchased were used.
Cost Element
Standard (per unit)
Actual
Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $53,720, and budgeted variable overhead was $34,710.
Instructions
Compute the total, price, and quantity variances for (1) materials and (2) labor, and (3) the total variance for manufacturing overhead.
Cost Element
Standard (per unit)
Actual
Direct materials 8 yards at $4.79 per yard $350,208 for 91,200 yards($3.84 per yard) Direct labor 1.4 hours at $13.20 per hour $233,778 for 16,580 hours
($14.10 per hour) Overhead 1.4 hours at $6.30 per hour $53,720 fixed overhead (fixed $3.30; variable $3.00) $48,840 variable overhead
Explanation / Answer
Total Material Variance 78976 Favorable Material Price Variance 86640 Favorable Material Qty variance 7664 Unfavorable Total Labor Variance 26802 Unfavorable Labour Price Variance 14922 Unfavorable Labour Qty variance 11880 Unfavorable Total Overhead Variance 900 Favorable Working Total material variance (standard Cost-Actual cost) (11200*8*4.79-350208) = 78976 F Material Price variance (Standard Price-Actual Price)*Actula Quantity used (4.79-3.84)*91200 = 86640 F Material Quantity variance (Standard Quantity for Actual Output-Actual Quantity)*Standard Price (11200*8-91200)*4.79 = 7664 U 2 Total Labour variance (standard Cost-Actual cost) (11200*1.4*13.20-233778) = 26802 U Labour rate variance (Standard Price-Actual Price)*Actula Hours worked (13.20-14.10)*16580 = 14922 U Labor Qty variance (Standard Hour for Actual Output-Actual Hour)*Standard Price (11200*1.4-16580)*13.20 = 11880 U Total Overhead variance (standard Cost-Actual cost) (53720+16580*3)-(53720+48840) 900 F
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