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Description of Variance Analysis

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

Please see attached file for full problem description.

Problem 1
1. Compute the direct materials price and quantity variances for the year (3 points).
2. Compute the direct labor rate and efficiency variances for the year (3 points).
3. Compute the variable overhead spending and efficiency variances for the year (4 points).
4. Compute the fixed overhead budget and volume variances for the year (5 points).

Problem 2
1. Prepare a performance report for the supervisor of Department 10 of Plant M for the month of March. (5 points)
2. Comment on the variances, over or under. To what might the variances be attributed to? (5 points)
3. Are there any significant variances (greater than 5%) of the budgeted amounts that should be examined by the supervisor? (5 points)

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Solution Summary

Word document contains calculation of variance and performance report.