Banner company manufactures flags of various countries each


Variances for direct materials and direct labor

Banner Company manufactures flags of various countries. Each flag has a standard of eight square feet of fabric and three hours of direct labor time. Information about recent production activity follows.

 

Actual cost of fabric:                                    $4.50 per square foot

Fabric consumed:                                         32,080 square feet

Standard price per square foot of fabric:           $4.25

Standard direct labor rate:                              $10.00 per hour

Actual direct labor rate:                                 $10.20 per hour

Actual labor hours worked:                             11,940

Actual production completed:                          4,000 flags

 

a.       Compute the materials price variance and the materials quantity variance.

b.      Compute the labor rate variance and the labor efficiency variance.

 

Overhead variances

Nova Manufacturing applies factory overhead to products on the basis of direct labor hours. At the beginning of the current year, the company's accountant made the following estimates for the forthcoming period:

  • Estimated variable overhead: $500,000
  • Estimated fixed overhead: $400,000
  • Estimated direct labor hours: 40,000

 

It is now 12 months later. Actual total overhead incurred in the manufacture of 7,900 units amounted to $895,100. Actual labor hours totaled 39,800. Assuming a direct labor standard of five hours per finished unit, calculate the following:

a.       Variable overhead efficiency variance

b.      Fixed overhead volume variance

c.       Overhead spending variance

 

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Financial Accounting: Banner company manufactures flags of various countries each
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