4.) LeatherWood manufactures armchairs. The company sses standard cost accountin

Question

4.) LeatherWood manufactures armchairs. The company sses standard cost accounting system In March 2024 11200 armchairs were produced The folowing standard and actual cost data applied to the month of March when normal capecity was 14,000 direct labor hours All materials purchased were used in production Cost Element Direct materials Standard (per wnit) Actual meters at S450 per meter 376 544 for 91,840meters 82 meters per unit and $410 per meter) Direct labor 12 hours at $13.00 per hour $202,137 50 for 14336 houns 128 hours per unit and $14 10 per hour) 12 hours at $6.00 per hour $48 000 foxed overhead foxed $3.50 variable $2.5 $36.000 variable overhead Overhead capacity, budgeted xed Overhead is applied on the basis of direct labor hours At normal overhead costs were $49,000, and budigeted variable overhesd costs were $36,000 Compute "total price and quantity variances for direct materials and direct labor" and total, controllable and volume variances for manufacturing overheed (30 pts)

Explanation / Answer

Solution:

Material Variances:

Standard quantity of material for actual production = 11200*8 = 89600 meter

Actual quantity of material = 91840 meter

Standard price of material = $4.50

Actual price of material = $4.10

Material price variance = (SP - AP) * AQ = ($4.50 - $4.10) * 91840 = $36,736 F

Material quantity variance = (SQ - AQ) * SR = (89600 - 91840) * $4.50 = $10,080 U

Labor variances:

Standard hours of direct labor = 11200 * 1.20 = 13440 hours

Standard rate of direct labor = $13

Actual hours of direct labor = 14336 hours

Actual rate of direct labor = $14.10 per hour

Direct labor rate variance = (SR - AR) * AH = ($13 - $14.10) * 14336 = $15,769.60 U

Direct labor efficiency variance = (SH - AH) * SR = (13440 - 14336) * $13 = $11,648 U

Overhead Variances:

Actual manufacturing overhead = Variable overhead + Fixed overhead

= $36,000 + $49,000 = $85,000

Budgeted manufacturing overhead = 11200 * 1.2 * $2.50 + $49,000 = $82,600

Manufacturing overhead applied = (Standard hours for actual production * Standard rate)

= (11200*1.20 * $6) = $80,640

Overhead controllable variance = Budgeted overhead - Actual overhead = $82,600 - $85,000 = $2,400 U

Overhead volume variance = Overhead applied - Budgeted overhead = $80,640 - $82,600 = $1,960 U

Total overhead variance = Manufacturing overhead applied - Actual manufacturing overhead

= $80,640 - $85,000

= $4,360 U

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