Hopkins Clothiers is a small company that manufactures tall-men’s suits. The com

Question

Hopkins Clothiers is a small company that manufactures tall-men’s suits. The company has used a standard cost accounting system. In May 2014, 11,200 suits were produced. The following standard and actual cost data applied to the month of May when normal capacity was 14,000 direct labor hours. All materials purchased were used.

Cost Element Standard (per unit) Actual Direct materials 8 yards at $4.40 per yard $375,575 for 90,500 yards ($4.15 per yard) Direct labor 1.20 hours at $13.40 per hour $200,220 for 14,200 hours ($14.10 per hour) Overhead 1.20 hours at $6.10 per hour (fixed $3.50; variable $2.60) $49,000 fixed overhead $37,000 variable overhead

Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $49,000, and budgeted variable overhead was $36,400.

Compute the overhead controllable variance and the overhead volume variance

Already got the overhead volume variance. Need help on overhead controllable variance (Answer is not 600)

Explanation / Answer

A.

1. Total Material Variance:

(Actual Quanity x Actual Price) - (Standard Quantity x Standard Price)

( AQ x AP ) - ( SQ x SP )

= 11200 x 8 yards = 89,600

= (90,500 x $ 4.15) - (89,600 x 4.40)

= ($375,575) - ($394,240)

= $ 18,665

2. Material Price Variance:

(Actual Quantity x Actual Price) - (Actual Quanity x Standard Price)

(AQ x AP ) - (AQ x SP)

= (90,500 x $ 4.15) - (90,500 x 4.40)

= ( $ 375575) - ($ 398200)

= $ 22,625

3. Material Quantity Variance:

(Actual Quatityx Standard Price) - ( Standard Quantity x Standard Price)

(AQ x SP) - (SQ x SP)

= (90,500 x $ 4.40 ) - (89,600 x 4.40)

= ($ 398,200) - ($ 394,240)

= $ 3,960

B.

1.Total Labour Variance :

(Actual Hour x Actual Rate) - (Standard Hour x Standard Rate)

(AH x AR) - (SH x SR)

= 11,200 x 1.20 = 13,440

= ( 14,200 x 14.10 ) - ( 13,440 x 13.40)

= ($ 200,220) - ($ 180,096)

= $ 20,124

2. Labour Price Variance:

(Actual Hour x Actual Rate) - (Actual Hour x standard Rate)

(AH x AR) - (AH x SR)

= ( 14,200 x 14.10 ) - ( 14,200 x 13.40 )

= ( 200,220) - ( 190,280)

= $ 9,940

3. Labour Quantity Variance:

( Actual Hour x Standard Rate) - ( Standard Hour x Standard Rate)

(AH x SR) - (SH x SR)

= (14300 x 13.40) - (13440 x 13.40)

= (191620) - (180096)

=$ 11,524

C.

1. Total Overhead Variance:

(Actual Overhead) - (Overhead Applied)

= ( 49,000 + 37,000) - ( 13,440 x 6.10)

= ( 86000) - ( 81984)

= 4,016

2. Overhead Controllable Variance:

(Actual Overhead) - (Overhead Budgeted)

= (49,000 + 37000) - [(13,440 x 2.60) + 49000 ]

= ( 86000 ) - ( 83944)

= 2,056

3. Overhead Volume Variance:

Fixed Overhead Rate x ( Normal Capacity hour - Standard hour Allowed )

$ 3.50 hr x ( 14,000 - 13,440 )

= 1,960

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