Compuțing standard cost variances and reporting to management SoundSmart manufactures headphone cases. During September 2020, the company produced 108,000 cases and recorded the following cost data: Standard Cost Information Quantity Cost Direct Materials 2 parts $ 0.16 per part Direct Labor 0.02 hours 7.00 per hour Variable Manufacturing Overhead 0.02 hours 11.00 per hour Fixed Manufacturing Overhead ($29,400 for static budget volume of 98,000 units and 1,960 hours, or $15 per hour) Actual Information Direct Materials (193,000 parts @ $0.21 per part) $ 40,530 Direct Labor (1,760 hours @ $7.15 per hour) 12,584 Variable Manufacturing Overhead 12,000 Fixed Manufacturing Overhead 30,000 Requirements 1 Compute the cost and efficiency variances for direct materials and direct labor. 2 For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances. 3 SoundSmart's management used better quality materials during September. Discuss the trade-off between the two direct material variances.
Compuțing standard cost variances and reporting to management SoundSmart manufactures headphone cases. During September 2020, the company produced 108,000 cases and recorded the following cost data: Standard Cost Information Quantity Cost Direct Materials 2 parts $ 0.16 per part Direct Labor 0.02 hours 7.00 per hour Variable Manufacturing Overhead 0.02 hours 11.00 per hour Fixed Manufacturing Overhead ($29,400 for static budget volume of 98,000 units and 1,960 hours, or $15 per hour) Actual Information Direct Materials (193,000 parts @ $0.21 per part) $ 40,530 Direct Labor (1,760 hours @ $7.15 per hour) 12,584 Variable Manufacturing Overhead 12,000 Fixed Manufacturing Overhead 30,000 Requirements 1 Compute the cost and efficiency variances for direct materials and direct labor. 2 For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances. 3 SoundSmart's management used better quality materials during September. Discuss the trade-off between the two direct material variances.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter9: Evaluating Variances From Standard Costs
Section: Chapter Questions
Problem 15E: Factory overhead cost variances The following data relate to factory overhead cost for the...
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Compuțing standard cost variances and reporting to management
SoundSmart manufactures headphone cases. During September 2020, the company
produced 108,000 cases and recorded the following cost data:
Standard Cost Information
Quantity
Cost
Direct Materials
2 parts
$ 0.16 per part
Direct Labor
0.02 hours
7.00 per hour
Variable Manufacturing Overhead
0.02 hours
11.00 per hour
Fixed Manufacturing Overhead ($29,400 for static budget volume of
98,000 units and 1,960 hours, or $15 per hour)
Actual Information
Direct Materials
(193,000 parts @ $0.21 per part)
$ 40,530
Direct Labor
(1,760 hours @ $7.15 per hour)
12,584
Variable Manufacturing Overhead
12,000
Fixed Manufacturing Overhead
30,000
Requirements
1
Compute the cost and efficiency variances for direct materials and direct labor.
2 For manufacturing overhead, compute the variable overhead cost and
efficiency variances and the fixed overhead cost and volume variances.
3 SoundSmart's management used better quality materials during September.
Discuss the trade-off between the two direct material variances.
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