Purchase Solution

Variance calculation

Not what you're looking for?

Ask Custom Question

Attached Problem.

2. The Sterling Company uses a standard cost system in which manufacturing overhead costs are applied to the units of the company's single product on the basis of direct labor-hours (DLHs). The standard cost card for the product follows:

Standard Cost Card-per unit of product:
Direct materials, 4 yards at $3.50 per yard $14
Direct labor, 1.5 DLHs at $8 per DLH 12
Variable overhead, 1.5 DLHs at $2 per DLH 3
Fixed overhead, 1.5 DLHs at $6 per DLH 9

The following data pertain to last year's activities:
- The company manufactured 18,000 units of product during the year. A total of 70,200 yards of material was purchased during the year at a cost of $3.75 per yard. All of this material was used to manufacture the 18,000 units.
- The company worked 29,250 direct labor hours during the year at a cost of $7.80 per hour.
- The denominator activity level was 22,500 direct labor hours.
- Budgeted fixed manufacturing overhead costs were $135,000 while actual manufacturing overhead costs were $133,200.
- Actual variable manufacturing overhead costs were $61,425.

Required:

a. Compute the direct materials price and quantity variances for the year.
b. Compute the direct labor rate and efficiency variances for the year.
c. Compute the variable overhead spending and efficiency variances for the year.
d. Compute the fixed overhead budget and volume variances for the year.
e. Discuss some possible reasons for the direct labor variances that you computed.

Purchase this Solution

Solution Summary

The solution explains how to calculate material, labor and overhead variances

Purchase this Solution


Free BrainMass Quizzes
Operations Management

This quiz tests a student's knowledge about Operations Management

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Introduction to Finance

This quiz test introductory finance topics.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.