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    Materials, labor, and overhead variance report

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    Kudos Company has set the following standard costs per unit for the product it manufactures.

    Direct materials ( 10 Ibs. @ $ 3 per Ib.). . . . . . . . . . . $ 30.00
    Direct labor ( 4 hrs. @ $ 6 per hr.) . . . . . . . . . . . . . 24.00
    Overhead ( 4 hrs. @ $ 2.50 per hr.) . . . . . . . . . . . . . 10.00
    Total standard cost . . . . . . . . . . . . . . . . . . . . . . . . . $ 64.00

    The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 10,000 units per month. The following flexible budget information is available.

    ----------------------------------------------------Operating Levels
    ----------------------------------------------------70% 80% 90%
    Production in units . . . . . . . . . . . . . . . . . . 7,000 8,000 9,000
    Standard direct labor hours . . . . . . . . . . . 28,000 32,000 36,000

    Budgeted overhead
    Variable overhead costs
    Indirect materials . . . . . . . . . . . . . . . . $ 8,750 $ 10,000 $ 11,250
    Indirect labor . . . . . . . . . . . . . . . . . . . 14,000 16,000 18,000
    Power . . . . . . . . . . . . . . . . . . . . . . . . . 3,500 4,000 4,500
    Maintenance . . . . . . . . . . . . . . . . . . . . 1,750 2,000 2,250
    Total variable costs . . . . . . . . . . . . . . 28,000 32,000 36,000
    Fixed overhead costs
    Rent of factory building . . . . . . . . . . 12,000 12,000 12,000
    Depreciation - machinery . . . . . . . . 20,000 20,000 20,000
    Supervisory salaries . . . . . . . . . . . . . 16,000 16,000 16,000
    Total fixed costs . . . . . . . . . . . . . . . . . 48,000 48,000 48,000
    Total overhead costs . . . . . . . . . . . . $ 76,000 $ 80,000 $ 84,000

    During May, the company operated at 90% of capacity and produced 9,000 units, incurring the following actual costs.

    Direct materials ( 92,000 Ibs. @ $ 2.95 per Ib.) . . . . . . . . ..................... $ 271,400
    Direct labor ( 37,600 hrs. @ $ 6.05 per hr.) . . . . . . ................................. .227,480
    Overhead costs
    Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,000
    Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000
    Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
    Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
    Rent of factory building . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
    Depreciation - machinery . . . . . . . . . . . . . . . . . . . . . . . 19,200
    Supervisory salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000............. 81,700
    Total costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......................... $ 580,580

    Required

    1. Compute the direct materials variance, including its price and quantity variances.
    2. Compute the direct labor variance, including its rate and efficiency variances.
    3. Compute these variances:
    (a) variable overhead spending and efficiency,
    (b) fixed overhead spending and volume, and
    (c) total overhead controllable.
    4. Prepare a detailed overhead variance report that shows the variances for individual items of overhead.

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    https://brainmass.com/business/labour-management-and-relations/materials-labor-and-overhead-variance-report-418426

    Solution Summary

    Materials, labor and overhead variance reports are examined.

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