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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
-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

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

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

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