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Finance- The Litton Company

The Litton Company has established Standards as follows:

Direct Material: 3 pounds per unit @ $4 per pound = $12 per unit
Direct Labor: 2 hours per unit at $8 per hour = $16 per unit
Variable Manufacturing Overhead: 2 hours per unit @$5 per hour = $10 per unit

Units Produced = 600 units
Direct Material Used = 2000 pounds
Direct Material Purchased (3,000 pounds) = $11,400
Direct Labor Cost (1,100 hours) = $9240
Variable manufacturing overhead cost incurred = $5720

The company applies variable manufacturing overhead to products on the basis of standard direct labor hours

From the foregoing information, compute the following variances. Show weather the variance is favorable or unfavorable.

Materials Price Variance = ? Materials quantity variance = ?

Direct Labor Variance = ? Direct Labor effeciency Variance = ?

Variable overhead rate variance = ? Variable overhead effeciency variance = ?

Solution Preview

The Litton Company has established Standards as follows:

Direct Material: 3 pounds per unit @ $4 per pound = $12 per unit
Direct Labor: 2 hours per unit at $8 per hour = $16 per unit
Variable Manufacturing Overhead: 2 hours per unit @$5 per hour = $10 per unit

Units Produced = 600 units
Direct Material Used = 2000 pounds
Direct Material Purchased (3,000 pounds) = $11,400
Direct Labor Cost (1,100 hours) = $9240
Variable manufacturing overhead cost incurred = $5720

The company applies variable manufacturing overhead to products on the basis of standard direct labor hours

From the foregoing ...

Solution Summary

The expert examines The Litton Company finance problems.

$2.19