Babylon Furniture manufactures, sofa sets and seats. The company uses a standard cost accounting system. In June 2022, 15,700 seats were made. The following standard and actual cost data applied to the month of June when the normal capacity, was 20,000 direct labor hours. All materials purchased were used in production, Cost Element Direct materials Direct labor Overhead Standard (per unit) 5 meters at $6.90 per meter 1.0 hours, at $11.40 per hour 1.0 hours at $9.30 per hour (fixed $6.30; variable $3.00) Actual 5,2 meters at $7 per meter 1.2 hours, at $11 per hour $120,000 fixed overhead $45,000 variable overhead Overhead is applied on the basis of direct labor hours. At normal capacity. budgeted fixed overhead costs were $126,000, and budgeted variable overhead costs were $60,000. a) Compute total, price and quantity variances for direct materials. b.) Compute total, rate and efficiency variances for direct labor. Compute total, controllable and volume variances for manufacturing overhead.
Babylon Furniture manufactures, sofa sets and seats. The company uses a standard cost accounting system. In June 2022, 15,700 seats were made. The following standard and actual cost data applied to the month of June when the normal capacity, was 20,000 direct labor hours. All materials purchased were used in production, Cost Element Direct materials Direct labor Overhead Standard (per unit) 5 meters at $6.90 per meter 1.0 hours, at $11.40 per hour 1.0 hours at $9.30 per hour (fixed $6.30; variable $3.00) Actual 5,2 meters at $7 per meter 1.2 hours, at $11 per hour $120,000 fixed overhead $45,000 variable overhead Overhead is applied on the basis of direct labor hours. At normal capacity. budgeted fixed overhead costs were $126,000, and budgeted variable overhead costs were $60,000. a) Compute total, price and quantity variances for direct materials. b.) Compute total, rate and efficiency variances for direct labor. Compute total, controllable and volume variances for manufacturing overhead.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter9: Standard Costing: A Functional-based Control Approach
Section: Chapter Questions
Problem 28P: Haversham Corporation produces dress shirts. The company uses a standard costing system and has set...
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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:Babylon Furniture manufactures, sofa sets and seats. The company uses a standard cost accounting system. In June
2022, 15,700 seats were made. The following standard and actual cost data applied to the month of June when the
normal capacity, was 20,000 direct labor hours. All materials purchased were used in production.
Cost Element
Direct materials
Direct labor
Overhead
Standard (per unit)
5 meters at $6.90 per meter
1.0 hours, at $11.40 per hour.
1.0 hours, at $9.30 per hour
(fixed $6.30; variable $3.00)
Actual
5,2 meters at $7 per meter
1.2 hours at $11 per hour
$120,000 fixed overhead
$45,000 variable overhead
Overhead is applied on the basis of direct labor hours. At normal capacity. budgeted fixed
overhead costs were $126,000, and budgeted variable overhead costs were $60,000.
a) Compute total, price and quantity variances for direct materials.
b.) Compute total, rate and efficiency variances for direct labor.
Compute total, controllable and volume variances for manufacturing overhead.
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