Garnett manufactures embroidered jackets. The company uses a standard cost syste
ID: 2593604 • Letter: G
Question
Garnett manufactures embroidered jackets. The company uses a standard cost system to control manufacturing costs. The following data represents the standard unit cost of a jacket:
Direct materials: 3.0 square feet @ $4 per square foot
Direct labor: 2.0 hours @ $9.40 per hour
Manufacturing overhead (allocated based on direct labor hours):
Variable: 2.0 hours @ $0.65 per hour
Fixed: 2.0 hours @ $2.20 per hour
Fixed overhead in total was budgeted to be $63,360 for each month.
Actual production was 14,000 jackets. Actual direct materials used were 2.5 square feet per jacket at a cost of $4.10 per square foot. Actual direct labor usage of 25,400 hours for a total cost of $241,300. Actual fixed overhead cost was $57,500, while actual variable overhead cost was $17,780. Instructions: In your post, indicate Garnett's total variance for this production run.
In your answer, you should include the total variance, as well as the 3 variances that make up the total variance.
In total, there should be a total of 4 numbers in your answer.
Explanation / Answer
Total direct materials variance = (Standard Price x Standard Quantity) – (Actual Price x Actual Quantity)
= (3 Sft. x $ 4 x 14,000) – (2.5 Sft. X $ 4.10 x 14,000)
= $ 168,000 - $ 143,500 = $ 24,500 F
Total direct labor variance = (Standard Rate x Standard Hour) – (Actual Rate x Actual Hour)
= (2 Hr x $ 9.4 x 14,000) – $ 241,300
= $ 263,200 - $ 241,300 = $ 21,900 F
Total actual overhead = Actual VOH + Actual FOH = $ 57,500 + $ 17,780 = $ 75,280
Flexible Budgeted overhead = (VOH Rate x Actual units) + Budgeted FOH
= ($ 0.65 x 2 X 14,000) + $ 63,360 = $ 18,200 + $ 63,360 = $ 81560
Applied overhead = (VOH Rate x Actual units) + (FOH Rate x Actual units)
= ($ 0.65 x 2 X 14,000) + ($ 2.20 x 2 x 14,000)
= $ 18,200 + $ 61,600 = $ 79,800
Overhead controllable variance = Flexible Budgeted overhead - Total actual overhead
= $ 81,560 - $ 75,280 = $ 6,280 F
Overhead volume variance = Applied overhead - Flexible Budgeted overhead
= $ 79,800 - $ 81,560 = - $ 1,760 U
Total overhead variance = Overhead controllable variance + Overhead volume variance
= $ 6,280 - $ 1,760 = $ 4,520 F
Total variance = Total direct materials variance + Total direct labor variance + Total overhead variance
= $ 24,500 + $ 21,900 + $ 4,520 = $ 50,920 F
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