Concept explainers
Rudd Clothiers is a small company that manufactures tall-men's suits. The company has used a
Cost Element | Standard (per unit) | Actual |
Direct materials | 8 yards at $4.40 per yard | $375,575 for 90,500 yards ($4.15 per yard) |
Direct labor | 1.2 hours at $13.40 per hour | $200,925 for 14,250 hours ($14.10 per hour) |
1.2 hours at $6.10 per hour (fixed $3.50; variable $2.60) | $49,000 fixed overhead $37,000 variable overhead |
Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $49,000, and budgeted variable overhead was $36,400.
Instructions
(a) Compute the total, price, and quantity variances for (1) materials and (2) labor.
(b) Compute the total overhead variance.
(c) - Which of the materials and labor variances should be investigated if management considers a variance of more than 4% from standard to be significant?
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