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    Variances

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    Sacks manufactures embroidered jackets. The company prepares flexible budgets and uses a standar cost system to control manufacturing costs. The following standar unit cost of a jacket is based on the static budget volume of 14,000 jackets per month.

    -Direct Materials (3.0 sq. ft x $4.00 per sq.ft) $12.00
    -Direct labor (2 hours x $9.40 per hour) $18.80
    Manufacturing overhead:
    -Variable (2 hours x @$0.65 per hour) $1.30
    -Fixed (2 hours x $2.20 per hour) $4.40
    $5.70
    Total Cost per jacket $36.50

    DATA FOR NOVEMBER OF THE CURRENT YEAR INCLUDE THE FOLLOWING
    -Actual production was 13,600 jackets
    -Actual direct Materials usage was 2.70 square feet per jacket at an actual cost of $4.15 per square foot
    -The amount of actual direct materials purchased was 40,000 square feet.
    -Actual direct labor usage of 24,480 hours cost $235,008
    -Total actual overhead cost was $79,000; $20,000 was variable

    a) Compute the eight variance
    Materials formula
    Vp= (Actual Price per unit of input - Standard Price) x Actual quantity bought
    Vq= (Actual quantity used - Standard quantity for actual level output achieve)x Std price.

    LABOR
    Vp= (Actual price per labor hours - Standard price) x Actual quantity
    Vq= (Actual quantity - Standard Quantity) x Standard price

    Variable Overhead
    Ap= $actual Variable overhead/ Actual activity base
    Aq= Actual activity base
    SP= $estimate Variable over head/Estimated activity base.

    Flexible Overhead
    Vp= (AP-SP) x Aq
    Vq= (Aq-SQ) x SP

    Spending variable= Difference between the amount spend
    Production Volume variable.

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    https://brainmass.com/business/accounting/variances-349736

    Solution Summary

    The solution explains the calculation of various cost variances

    $2.19

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