Problem #1: Standard Costing Ultra, Inc. manufactures and sells a full line of s

Question

Problem #1: Standard Costing Ultra, Inc. manufactures and sells a full line of sunglasses. The company uses a standard cost system. Department managers' are held responsible for the explanation of the variances in their department performance reports. Recently, the variances in the Prestige line of sunglasses have been of concern. Data for the month of August is presented below. Assume beginning and ending inventory levels for WiP and FG are zero. Static Bud $600,000 $150,000 $135,000 $114,000 $201,000 tual $575,000 $145,000 $142,000 $111,000 $177,000 revenues DM DL FOH (cost driver gross profit DL hours) selling price per Prestige sunglass DM (total # ounces) DL rate (S per DL hour) $76.923 15,600 $18.00 $78.767 16,000 $14.20

Explanation / Answer

Workings:

DM spending variance 8846 Favourable DM efficiency variance 3846 Unfavourable DL spending variance 38000 Favourable DL spending variance 45000 Unfavourable FOH volume variance 38000 Unfavourable FOH spending variance 41000 Favourable

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