Samuel Thomas is a cost accountant and business analyst for Dashing Design Compa

Question

Samuel Thomas is a cost accountant and business analyst for Dashing Design Company? (DDC), which manufactures expensive brass doorknobs. DDC uses two direct cost? categories: direct materials and direct manufacturing labor. Thomas feels that manufacturing overhead is most closely related to material usage.? Therefore, DDC allocates manufacturing overhead to production based upon pounds of materials used.

At the beginning of 2014?, DC budgeted annual production of 450,000 doorknobs and adopted the following standards for each? doorknob:

Input

Cost/Doorknob

Direct materials (brass)

0.3 lbs. @ $11/lb.

$3.30

Direct manufacturing labor

1.2 hours @ $18/hour

21.60

Manufacturing overhead:

Variable

$5/lb x 0.3 lb.

1.50

Fixed

$14/lb. x 0.3 lb.

4.20

Standard cost per doorknob

$30.60

Actual results for April 2014 were as? follows:

Production

29,000 doorknobs

Direct materials purchased

12,300 lbs. at $12/lb.

Direct materials used

8,500 lbs.

Direct manufacturing labor

29,300 hours for $615,300

Variable manufacturing overhead

$64,700

Fixed manufacturing overhead

$160,000

Requirements:

a. Direct materials price variance? (based on? purchases)

b. Direct materials efficiency variance

c. Direct manufacturing labor price variance

d. Direct manufacturing labor efficiency variance

e. Variable manufacturing overhead spending variance

f. Variable manufacturing overhead efficiency variance

g. ?Production-volume variance

h. Fixed manufacturing overhead spending variance

Input

Cost/Doorknob

Direct materials (brass)

0.3 lbs. @ $11/lb.

$3.30

Direct manufacturing labor

1.2 hours @ $18/hour

21.60

Manufacturing overhead:

Variable

$5/lb x 0.3 lb.

1.50

Fixed

$14/lb. x 0.3 lb.

4.20

Standard cost per doorknob

$30.60

Explanation / Answer

Budgeted 450000 SQ SR Standard Unit Cost Direct Material 0.3 11 3.3 Direct Labor 1.2 18 21.6 Variable OVH 0.3 5 1.5 Fixed OVH 0.3 14 4.2 Total Standard Cost 30.6 Actual: Unit produced and sold 29000 Direct Material 8500 12 102000 Direct Material Purchased 12300 12 147600 Direct Labor 29300                                      21.00 615300 Variable OVH 8500                                        7.61 64700 Fixed OVH 8500                                      18.82 160000 Direct Material Variance: Material Efficiency Variance (SQ-AQ)*SR ((0.3*29000)-12300)*11 39600 U Material Price Variance (SP-AP)*AQ (11-12)*12300 12300 U Direct Labor Variance: Labor Efficiency Variance (SQ-AQ)*SR ((1.2*29000)-29300)*18 99000 F Labor Price Variance (SP-AP)*AQ (21-18)*29300 87900 U Variable OVH Variance: Labor Efficiency Variance (SQ-AQ)*SR ((0.3*29000)-12300)*5 18000 U Labor Price Variance (SP-AP)*AQ (5-7.61)*12300 32103 U Fixed OVH Variance: Fixed Overhead Volume Variance Standard Overhead-Budgeted Overhead 121800-157500 35700 F Fixed Overhead Spending Variance Budgeted Overhead-Actual oVerhead 157500-160000 2500 U Budgeted Overhead (450000*4.2)/12=157500 Standard Overhead 0.3*29000*14=121800 Production Volume Variance (Acutal Units-Budgeted Units)*Budgeted Overhead rate (29000-450000/12)*4.2 (29000-37500)*4.2 35700 U An excessive quantity of production is considered to be a favorable variance, while an unfavorable variance is when fewer units are produced than expected.

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