Problem 10B-3 Comprehensive Variance Analysis; Journal Entries [LO2, LO3, LO4, LO5, LO6, LO9] Haliburton Mills Inc. is a large producer of men’s and women’s clothing. The company uses standard costs for all of its products. The standard costs and actual costs for a recent period are given below for one of the company’s product lines (per unit of product): StandardCost ActualCost Direct materials: Standard: 3.0 metres at $5.60 per metre $ 16.80 Actual: 3.2 metres at $5.40 per metre $ 17.28 Direct labour: Standard: 2.0 hours at $3.50 per hour 7.00 Actual: 1.8 hours at $3.85 per hour 6.93 Variable manufacturing overhead: Standard: 2.0 hours at $1.80 per hour 3.60 Actual: 1.8 hours at $2.10 per hour 3.78 Fixed manufacturing overhead: Standard: 2.0 hours at $5.00 per hour 10.00 Actual: 1.8 hours at $5.05 per hour 9.09 Total cost per unit $ 37.40 $ 37.08 Actual costs: 7,000 units at $37.08 $ 259,560 Standard costs: 7,000 units at $37.40 261,800 Difference in cost—favourable $ 2,240 During this period, the company produced 7,000 units of product. A comparison of standard and actual costs for the period on a total cost basis is also given above. There was no inventory of materials on hand to start the period. During the period, 22,400 metres of materials was purchased and used in production. The denominator level of activity for the period was 12,740 hours. How do I calculate... Compute the fixed overhead budget and volume variances. (Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
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.
Problem 10B-3 Comprehensive Variance Analysis ; Journal Entries [LO2, LO3, LO4, LO5, LO6, LO9]
Haliburton Mills Inc. is a large producer of men’s and women’s clothing. The company uses
| Standard Cost |
Actual Cost |
|||||
| Direct materials: | ||||||
| Standard: 3.0 metres at $5.60 per metre | $ | 16.80 | ||||
| Actual: 3.2 metres at $5.40 per metre | $ | 17.28 | ||||
| Direct labour: | ||||||
| Standard: 2.0 hours at $3.50 per hour | 7.00 | |||||
| Actual: 1.8 hours at $3.85 per hour | 6.93 | |||||
| Variable manufacturing overhead: | ||||||
| Standard: 2.0 hours at $1.80 per hour | 3.60 | |||||
| Actual: 1.8 hours at $2.10 per hour | 3.78 | |||||
| Fixed manufacturing overhead: | ||||||
| Standard: 2.0 hours at $5.00 per hour | 10.00 | |||||
| Actual: 1.8 hours at $5.05 per hour | 9.09 | |||||
| Total cost per unit | $ | 37.40 | $ | 37.08 | ||
| Actual costs: 7,000 units at $37.08 | $ | 259,560 |
| Standard costs: 7,000 units at $37.40 | 261,800 | |
| Difference in cost—favourable | $ | 2,240 |
During this period, the company produced 7,000 units of product. A comparison of standard and actual costs for the period on a total cost basis is also given above.
There was no inventory of materials on hand to start the period. During the period, 22,400 metres of materials was purchased and used in production. The denominator level of activity for the period was 12,740 hours.
How do I calculate...
Compute the fixed overhead budget and volume variances. (Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
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