During 2011, actual number of units produced and sold was 5,500. Actual cost of

Question

During 2011, actual number of units produced and sold was 5,500. Actual cost of direct materials used was $668,800, based on 70,400 pounds purchased at $9.50 per pound. Direct manufacturing labor-hours actually used were 18,500, at the rate of $51.50 per hour. As a result, actual direct manufacturing labor costs were $952,750. Actual fixed costs were $1,180,000. There were no beginning or ending inventories.

Required

1. Calculate the sales-volume variance and flexible-budget variance for operating income.
2. Compute price and efficiency variances for direct materials and direct manufacturing labor.

Explanation / Answer

Flexible-budget variance a

70,400 pounds x $9.5/pound = $668,800

70,400 pounds x $10/pound = $704,000

c 5,500 statues x 12 pounds/statue / $10/pound

= 66,000 pounds x $10/pound = $660,000

d 18,500 hours x $51.50/hour = $952,750

e 18,500 hours x $50/hour = $925,000

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