Flandro Company uses a standard cost system and sets predetermined overhead rate

Question

Flandro Company uses a standard cost system and sets predetermined overhead rates on the basis of direct labor-hours. The following data are taken from the company’s budget for the current year:

During the year, the company produced 4,680 units of product and incurred the following costs:

Redo the standard cost card in a clearer, more usable format by detailing the variable and fixed overhead cost elements. (Round your answers to 2 decimal places.)

     

Prepare an analysis of the variances for direct materials and direct labor for the year. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)

      

Prepare an analysis of the variances for variable and fixed overhead for the year. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)

      

  Denominator activity (direct labor-hours) 9,000   Variable manufacturing overhead cost $ 29,250   Fixed manufacturing overhead cost $ 96,750

Explanation / Answer

Answer: a. Standard Cost Card Direct material $                       8.20 Direect labour $                     20.00 Variable manufactuiring overhead $                       6.50 ($29,250/9,000 hours*2hours) Fixed manufacturing overhead $                     21.50 ($96,750/9,000 hours*2hours) Standard cost per unit $                     56.20 b. Direct material Actual Cost Difference Flexible Budget Difference Standard Cost Actual material Actual Rate Actual Cost Actual hours Standard rate Standard hours Standard rate Standard cost                                          19,300 $                       2.00 $                38,600.00           19,300.00 $                 2.05 $      39,565.00                 18,720 $                 2.05 $      38,376.00 (29,700*2) $                965.00 $      (1,189.00) (4680*4) Material price variance $                   965.00 (39,565-38,600) Favourable Material quantity variance $             (1,189.00) (38,376-39,565) Unfavourable Material cost variance $                (224.00) (38,376-38,600) Unfavourable Direct labour Actual Cost Difference Flexible Budget Difference Standard Cost Actual hours Actual Rate Actual Cost Actual hours Standard rate Standard hours Standard rate Standard cost                                          10,000 $                       8.15 $                81,500.00           10,000.00 $               10.00 $    100,000.00                   9,360 $               10.00 $      93,600.00 (10,000*8.15) $          18,500.00 $      (6,400.00) (4680*2) Labour price variance $             18,500.00 (100,000-81,500) Favourable Labour efficiency variance $             (6,400.00) (93,600-100,000) Unfavourable Labour cost variance $             12,100.00 (93,600-81,500) Favourable c. Variable overhead Variance Actual Cost Difference Flexible Budget Difference Standard Cost Actual hours Actual Rate Actual Cost Actual hours Standard rate Standard hours Standard rate Standard cost                                          10,000 $                       3.10 $                31,000.00           10,000.00 $                 3.25 $      32,500.00                   9,360 $                 3.25 $      30,420.00 $             1,500.00 $      (2,080.00) Variable overhead rate variance $               1,500.00 (32,500-31,000) Favourable Variable overhead efficiency variance $             (2,080.00) (30,420-32,500) Unfavourable Variable overhead cost variance $                (580.00) (30,420-31,000) Unfavourable Fixed manufacturing overhead variance Budget variance $             33,250.00 ($96,750-63,500) Volume Variance $             10,750.00 (10,000-9,000)*$21.5/2

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