Water Movers, Inc. is known throughout the world for its H2O-X high-capacity wat

Question

Water Movers, Inc. is known throughout the world for its H2O-X high-capacity water pump, used in irrigation systems. The pump’s standard cost is as follows. The company’s predetermined fixed overhead rate is based on an expected capacity of 100,000 direct labor hours per month.

During the month of September, the company produced 17,010 of the 20,000 pumps that had been scheduled for production in the budget. The company used 326,730 pounds of material during September. The direct labor payroll for the month was $839,700 for 93,300 direct labor hours. Variable overhead costs were $826,600; fixed overhead costs were $539,100. The company’s purchasing agent signed a new supply contract that resulted in purchases of 439,700 pounds of direct materials at a total price of $1,978,650.

Calculate Water Movers’ direct materials, direct labor, and overhead variances for September.

Standard Price Standard Quantity Standard Cost Direct materials $5 per pound 16 pounds $80 Direct labor $8 per DLH 5 DLH 40 Variable overhead $9 per DLH 5 DLH 45 Fixed overhead $5 per DLH 5 DLH 25 $190

Explanation / Answer

Variable Overhead Efficiency Variance (AH-SH)*SR (93300-85050)*9 74250 U B Variable Overhead Spending Variance AHx (AR-SR) 93300*(8.86-9) -13062 F Fixed Overhead Spensding variance Actual Fixed Overhead-Budgeted Fixed Overhead 539100-500000 39100 U

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