Question: Carlsbad Company has set the following standard costs per unit for the product it manufactures.
Direct materials (40 oz. @ $0.75 per oz.) . . . . . . . . $ 30.00
Direct labor (2 hr. @ $20 per hr.) . . . . . . . . . . . . . 40.00
Overhead (2 hr. @ $53.50 per hr.) . . . . . . . . . . . . 107.00
Total standard cost . . . . . . . . . . . . . . . . . . . . . . . . . $177.00
The predetermined overhead rate is based on a planned operating volume of 60% of the productive capacity of 3,000 units per month. The following flexible budget information is available.
During March, the company operated at 70% of capacity and produced 2,100 units, incurring the following actual costs.
Required: 1. Compute the direct materials cost variance, including its price and quantity variances.
2. Compute the direct labor variance, including its rate and efficiency variances.
3. Compute these variances: (a) variable overhead spending and efficiency, (b) fixed overhead spending and volume, and (c) total overhead controllable.
4. Prepare a detailed overhead variance report that shows the variances for individual items of overhead.