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Question about Variance calculations

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).

Attachments

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