Problem 25 See schedule for due date. You may develop your own working paper for

Question

Problem 25 See schedule for due date. You may develop your own working paper format (i.e. use the matrix format) or use the working papers provided. Deckers Corporation manufactures a single product. The standard cost per unit of product is shown below. Direct materials-1 pound plastic at $9.10 per pound $ 9.10 Direct labor-1.5 hours at $15.60 per hour 23.40 Variable manufacturing overhead 11.25 Fixed manufacturing overhead 3.75 Total standard cost per unit $47.50 The predetermined manufacturing overhead rate is $10 per direct labor hour ($15.00 ÷ 1.5). It was computed from a master manufacturing overhead budget based on normal production of 7,500 direct labor hours (5,000 units) for the month. The master budget showed total variable costs of $56,250 ($7.50 per hour) and total fixed overhead costs of $18,750 ($2.50 per hour). Actual costs for October in producing 4,950 units were as follows. Direct materials (5,130 pounds) $ 48,684 Direct labor (7,000 hours) 113,750 Variable overhead 56,690 Fixed overhead 21,426 Total manufacturing costs $240,550 The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored. Instructions Compute the following variances for Deckers Corporation and indicate whether the variance is favorable or unfavorable (F or U). Round computations and final answers to 0 decimal places. Show all computations or no credit given. 1. Total materials variance 2. Direct materials price variance 3. Direct materials quantity variance 4. Total labor variance 5. Direct labor price variance 6. Direct labor quantity variance 7. Total overhead variance

Explanation / Answer

1. Total materials variance = Total standard material cost - Total actual material cost = ( 1 x $ 9.10 x 4,950) - $ 48,684 = $ 3,639 U

2. Direct material price variance = ( Standard price per unit - Actual price per unit ) x Actual quantity purchased = ( $ 9.10 - 9.49) x 5,130 = $ 2,001 U

3. Direct materials quantity variance = ( Standard quantity for actual output - Actual quantity used ) x Standard price per unit = ( 4,950 - 5,130) x $ 9.10 = $ 1,638 U

4. Total labor variance = Total standard labor cost - Total actual labor cost = (1.5 hours x $ 15.60 x 4,950) - $ 113,750 = $ 2,080 F

5. Direct labor price variance = ( Standard hourly labor rate - Actual hourly labor rate ) x Actual hours worked = ( $ 15.60 - $ 16.25) x 7,000 = $ 4,550 U

6. Direct labor quantity variance = ( Standard hours for actual output - Actual hours worked ) x Standard hourly labor rate = ( 4,950 x 1.50 - 7,000) x $ 15.60 = $ 6,630 F

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