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 9,360 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) 18,000   Variable manufacturing overhead cost $ 50,400   Fixed manufacturing overhead cost $ 165,600

Explanation / Answer

1) Standard cost per unit

2) Material cost variances:

Material cost Variance=SQ*SR-AQ*AR=37,440*$1.6-59,400*$1.55=-$32,166-U

Material quantity variance=SQ*SR-AQ*SR=-$35,136-U

Material price variance=AQ*SR-AQ*AR=$2,970-F

Labour cost variances:

Labour cost Variance=SH*SR-AH*AR=18,720*$8-19,000*$7.7=$3,460-F

Labour efficiency variance=SH*SR-AH*SR=-$2,240-U

Labour price variance=AH*SR-AH*AR=$5,700-F

3)

Variable cost variances:

Variable cost Variance=SH*SR-AH*AR=18,720*$2.8-19,000*$2.63=$2,446-F

Variable Overhead rate efficiency variance=SH*SR-AH*SR=-$784-U

Variable overhead price variance=AH*SR-AH*AR=$3,230-F

Fixed Cost Variance=Bugeted cost -Actual cost=$165,600-$112,100=$53,500-F

Particulars Cost per unit Material cost $1.6*4yards $6.4 Labour cost $8*2 hours $16 Variable manufacturing cost $.50,400/18,000*2 hours $5.6 Fixed manufacturing cost $165,600/18,000*2hours $18.4 Total Cost $46.4

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