Prepare a schedule of total standard manufacturing costs for the 24000 productions of windows in April 2021. For the month of April, compute the following variances, indicating whether each is favourable (F) or unfavourable (U): Direct materials price variance (based on purchases) Direct materials efficiency variance Direct manufacturing labour price variance Direct manufacturing labour efficiency variance Variable manufacturing overhead spending variance Variable manufacturing overhead efficiency variance Fixed manufacturing overhead spending variance Production-volume variance Using the data in requirement 2 above, explain the following: Direct materials variances Direct labour variances Variable manufacturing overhead efficiency varianc
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.
West Glass (WG), which manufactures specialty windows, recently hired Derek Smith as the
At the beginning of 2021, WG budgeted annual production of 200,000 windows and adopted the following standards for each window:
Input
Cost/window
Direct materials 0.5 lb. @ $12/lb. $ 6.00
Direct manufacturing labour 1.4 hours @ $20/hour 28.00
Manufacturing overhead:
Variable $6/lb. 0.5 lb. 3.00
Fixed $15/lb. 0.3 lb. 4.50
Actual results for April 2021 were as follows:
Production 24,000 windows
Direct materials purchased 12,000 lb. at $13/lb.
Direct materials used 11,450 lb.
Direct manufacturing labour 38,000 hours for $798000
Variable manufacturing overhead $68,150
Fixed manufacturing overhead $155,000
Required:
- Prepare a schedule of total standard
manufacturing costs for the 24000 productions of windows in April 2021.
- For the month of April, compute the following variances, indicating whether each is favourable (F) or unfavourable (U):
- Direct materials price variance (based on purchases)
- Direct materials efficiency variance
- Direct manufacturing labour price variance
- Direct manufacturing labour efficiency variance
- Variable manufacturing overhead spending variance
- Variable manufacturing overhead efficiency variance
- Fixed manufacturing overhead spending variance
- Production-volume variance
- Using the data in requirement 2 above, explain the following:
Direct materials variances
Direct labour variances
Variable manufacturing overhead efficiency variance
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