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    Question about Variance calculations

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    Part A

    Rapache Clothiers is a small company that manufactures tall-men's suits. The company has used a standard cost system. In May 2008, 11,200 suits were produced. The following standard and actual cost data applied to the month of May when normal capacity was 14,000 direct labor hours. All materials purchased were used.

    Cost Element

    Standard (per unit)

    Actual
    Direct materials 8 yards at $4.30 per yard $371,050 for 90,500 yards
    ($4.10 per yard)
    Direct labor 1.2 hours at $13.50 per hour $201,630 for 14,300 hours
    ($14.10 per hour)
    Overhead 1.2 hours at $6.00 per hour $49,000 fixed overhead
    (fixed $3.50; variable $2.50) $37,000 variable overhead

    Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $49,000, and budgeted variable overhead was $35,000.

    Instructions

    Compute the total, price, and quantity variances for (1) materials and (2) labor, and (3) the total, controllable, and volume variances for manufacturing overhead.

    Part B

    Rapache Clothiers is a small company that manufactures tall-men's suits. The company has used a standard cost system. In May 2008, 11,200 suits were produced. The following standard and actual cost data applied to the month of May when normal capacity was 14,000 direct labor hours. All materials purchased were used.

    Cost Element

    Standard (per unit)

    Actual
    Direct materials 8 yards at $4.30 per yard $371,050 for 90,500 yards
    ($4.10 per yard)
    Direct labor 1.2 hours at $13.50 per hour $201,630 for 14,300 hours
    ($14.10 per hour)
    Overhead 1.2 hours at $6.00 per hour $49,000 fixed overhead
    (fixed $3.50; variable $2.50) $37,000 variable overhead

    Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $49,000, and budgeted variable overhead was $35,000.

    Instructions

    Which of the materials and labor variances should be investigated if management considers a variance of more than 4% from standard to be significant? Refer to P25-3 (a).

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    Solution Preview

    Rapache Clothiers is a small company that manufactures tall-men’s suits. The company has used a standard cost system. In May 2008, 11,200 suits were produced. The following standard and actual cost data applied to the month of May when normal capacity was 14,000 direct labor hours. All materials purchased were used.

    Cost Element Standard (per unit) Actual
    Direct materials 8 yards at $4.30 per yard $371,050 for 90,500 yards ($4.10 per yard)
    Direct labor 1.2 hours at $13.50 per hour $201,630 for 14,300 hours
    ($14.10 per hour)
    Overhead 1.2 hours at $6.00 per hour $49,000 fixed overhead
    (fixed $3.50; variable $2.50) $37,000 variable overhead

    Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $49,000, and budgeted variable overhead was $35,000.

    Instructions

    Compute the total, price, and quantity variances for (1) materials and (2) labor, and (3) the total, ...

    Solution Summary

    The solution explains the calculation of material, labor and overhead variances

    $2.19

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