Hopkins Clothiers is a small company that manufactures tall-men’s suits. The com
ID: 2500220 • Letter: H
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, 10,200 suits were produced. The following standard and actual cost data applied to the month of May when normal capacity was 14,500 direct labor hours. All materials purchased were used.
Cost Element
Standard (per unit)
Actual
Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $56,550, and budgeted variable overhead was $40,600.
(a) Compute the total, price, and quantity variances for (1) materials and (2) labor. (Round answers to 0 decimal places, e.g. 125.)
(b) Compute the total overhead variance.
Cost Element
Standard (per unit)
Actual
Direct materials 8 yards at $4.20 per yard $332,452 for 82,290 yards ($4.04 per yard) Direct labor 1.20 hours at $13.00 per hour $175,922 for 13,070 hours ($13.46 per hour) Overhead 1.20 hours at $6.70 per hour (fixed $3.90; variable $2.80) $48,300 fixed overhead $37,000 variable overheadExplanation / Answer
a) 1)
Material Price variance = Actual quantity of material purchased ( Standard price - Actual Price)
= 82290 (4.20 - 4.04)
= $ 13166.40
= $ 13166 (approx) [ This is Favourable ]
Material Quantity Variance = Standard price ( Standard quantity for actual output - Actual quantity)
= 4.20 [ ( 10200 * 8) - 82290 ]
= 4.20 ( 81600 - 82290)
= $ 2898 (Unfavourable)
Total Material Variance = 13166 - 2898
= $ 10268 [ This is Favourable ]
Alternatively, Total material variance can also be calculated using formula.
a. 2) Labour price variance = Actual Hours paid ( Standard price per hour - Actual price per hour)
= 13070 ( 13 - 13.46)
= $ 6012.20
= $ 6012 (approx) [ This is Unfavourable.]
Labour Quantiy Variance = Standard price per hour ( Standard hours for actual output - Actual hours)
= 13 [ ( 10200 * 1.20) - 13070 ]
= 13 ( 12240 - 13070)
= $ 10790 [ This is Unfavourable ]
Total Labour variance = Standard cost for actual output - Actual cost of actual output
= ( 1.20 * 13 * 10200 - 175922)
= $ 16802 [ This is Unfavourable]
OR
= 6012 + 10790 = $ 16802 (Unfavourable)
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