Fixed Manufacturing Overnead 25,000 Print Done Quantity Cost Direct Materials Di

Question

Fixed Manufacturing Overnead 25,000 Print Done Quantity Cost Direct Materials Direct Labor Variable Manufacturing Overhead 2 parts $ 0.16 per part 8.00 per hour 0.02 hours 11.00 per hour 0.02 hours Fixed Manufacturing Overhead ($33,320 for static budget volume of 98,000 units and 1,960 hours, or $17 per hour) Actual Cost Information Direct Materials Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Overnead (214,000 parts (1,660 hours@ 0.21 per part 44,940 8.15 per hour) 13,529 14,000 25,000 Requirements 1. Compute the cost and efficiency variances for direct materials and direct 2. For manufacturing overhead, compute the variable overhead cost and 3. Smartsets's management used better quality materials during September labor efficiency variances and the fixed overhead cost and volume variances Discuss the trade-off between the two direct material variances Print Done

Explanation / Answer

Requirement 3

Smartsets's management knew that using higher quality materials would result in an unfavorable cost variance. They hoped these materials would result in more efficient usage than "standard" materials. The result was an overall unfavorable direct materials variance.

Note: Since the drop-down menus for requirement 3 are not provided with the question, kindly check the same for exact wordings to be used prior to submission.

Requirement 1 Formula = Variance Direct materials cost variance (AC - SC) x AQ = $       10,700 U (0.21 - 0.16) x 214000 Direct labor cost variance (AC - SC) x AQ = $             249 U (8.15 - 8.00) x 1660 Direct materials efficiency variance (AQ - SQ) x SC = $             320 F (214000 - 216000) x 0.16 Direct labor efficiency variance (AQ - SQ) x SC = $         4,000 F (1660 - 2160) x 8.00 Requirement 2 VOH cost variance Actual VOH - (SC x AQ) = $         3,860 F 14400 - (11.00 x 1660) VOH efficiency variance (AQ - SQ) x SC = $         5,500 F (1660 - 2160) x 11.00 FOH cost variance Actual FOH - Budgeted FOH = $         8,320 F 25000 - 33320 FOH volume variance Budgeted FOH - Allocated FOH = $         5,100 U 33320 - 28220

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