Fredman Company has a standard costing system and keeps all its costs up to date
ID: 2500671 • Letter: F
Question
Fredman Company has a standard costing system and keeps all its costs up to date. The company's main product is copper wind chimes, which are made in a single department. The standard variable costs for one wind chime (unit) are as follows:
Direct materials (3 yards at $37.50
$12.50 per yard)
Direct labor (2 hours at $9.00 per hour) 18.00
Variable overhead (2 hours @ 10.00
$5.00 per direct labor hour)
Standard variable cost $65.50
per unit
The company's normal capacity is 10,000 direct labor hours. Its budgeted fixed overhead costs for the year were $44,000. During the year, it produced and sold 4,900 wind chimes and it purchased 15,000 yards of direct materials; the purchase cost was $12.40 per yard. The average labor rate was $9.10 per hour, and 10,050 direct labor hours were worked. The company's actual variable overhead costs for the year were $48,900, and its fixed costs were $45,000.
Using the data given, compute the following variances on the provided pages:
1. Direct materials cost variances:
a. Direct materials price variance
b. Direct materials quantity variance
c. Total direct materials cost variance
2. Direct labor cost variances:
a. Direct labor rate variance
b. Direct labor efficiency variance
c. total direct labor cost variance
3. Variable overhead variances:
a. Variable overhead spending variance
b. Variable overhead efficiency variance
c. Total variable overhead variance
4. Fixed overhead variances:
a. Fixed overhead budget variance
b. fixed overhead volume variance
c. Total fixed over head variance
Direct materials (3 yards at $37.50
$12.50 per yard)
Direct labor (2 hours at $9.00 per hour) 18.00
Variable overhead (2 hours @ 10.00
$5.00 per direct labor hour)
Standard variable cost $65.50
per unit
Explanation / Answer
AP/AR/SP/SR=> Actual Price / Actual Rate/Standard Price / Standrad Rate
AQ/SQ/AH/SH=> Actual qunatity/ Standard Quantity/ actual HGours/ standard hours
ANSWER 1
Direct materials price variance => (SP - AP) AQ
=> (12.50 - 12.40 ) 15000
=> $1500 F
Direct materials quantity variance => (AQ - SQ) SP
=> (15000-14700) 12.50
$3750 F
Total direct materials cost variance => 1500+ 3750 => $5250 F
ANSWER2
Direct labor rate variance => (SR - AR) AH
=> (9 - 9.1) 10050
=> $1005 U
Direct labor efficiency variance => (AH - SH ) SR
=> (10050 - 10000) 9
=> $450 F
total direct labor cost variance => -1005 + 450 =>$ 555 U
ANSWER 3
Variable overhead spending variance => (SR - AR) AH
=> (5 - 4.87 ) * 10050
=> $1307 F
Variable overhead efficiency variance => (AH - SH ) SR
=> (10050 - 10000 ) 5
=> $250 F
Total variable overhead variance => 1307 + 250 => $1557F
ANSWER 4
Fixed Overhead BUDGET Variance = Actual Fixed Overhead - Budgeted Fixed Overhead
=> 45000 - 44000
=> $1000 F
Fixed overhead volume variance => Absorbed Fixed overheads - Budgeted Fixed Overheads
Standard Fixed Overhead Rate = > 44000 /5000 => 8.8
Fixed overhead volume variance => ( 4900 * 8.8 ) - 44000
=> $4800 U
Total fixed over head variance => -4800 + 1000 => $ 3800 U
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