ys, Inc. manufactures flower pots. The company uses a standard cost system. Flow
ID: 2536501 • Letter: Y
Question
ys, Inc. manufactures flower pots. The company uses a standard cost system. Flower are sold for $39 each. At the start of monthly production, Sunny estimated 9,000 flower uld be produced during March. Sunny has established the following material and labor PuCircle the correct answer - Show your work) sunny Da pots pots wo standards to produce one flower pot: Standard Quantity 2.5 pounds 1.0 hours Standard Price $4 per pound $12 per hour Direct Materials: Direct Labor: Sunny uses a pretermined overhead rate based on standard direct labor hours hour During March the following activity was recorded relat ing to the production of flower pots: 1. The company produced 8,500 units during the month. 2. A total of 22,000 pounds of materials were purchased at a cost of $82,000. 3. A total of 22,000 pounds of materials were used in production. 4. 8,000 hours of labor were incurred during the month at a total wage cost of $98,000. 5. Th e company actually incurred $98,000 of total overhead costs. Required ceExplanation / Answer
Variable Overhead Rate Variance =
(Standard Variable overhead Rate * Actual Labor Hours) – Actual Variable overhead cost
Variable Overhead Rate Variance = ($7 per hour * 8000 hours) - $98000
= $56000- $98000
= $42000 U
Variable overhead Efficiency Variance = (Standard Hour –Actual Hour) *Standard Variable Rate
Standard Hour = Units produced * Standard labor hour per unit
= 8500 units * 1 hour per unit
= 8500 hours
Variable Overhead efficiency variance = (8500 hours – 8000 hours) * $7 per hour
= 500 hours * $7 per hour
= $3500 F
Total variable Overhead cost variance = Variable Overhead rate Variance + Variable Overhead Efficiency Variance
Total Variable Overhead Cost Variance = $42000 U + $3500 F
= $38500U
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