Problem: Compute materials, labor, and overhead variances
Based on a standard volume of output of 96,000 units per month, the standard cost of the project manufactured by Tahoe Company consists of:
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Direct materials (0.25 pounds x $8 per pound)
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$2.00
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Direct labor (0.5 hours x $7.60 per hour)
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3.80
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Variable manufacturing overhead
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2.50
|
|
Fixed manufacturing overhead ($144,000 in total)
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1.50
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Total
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$9.80
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A total of 25,200 pounds of materials was purchased at $8.40 per pound. During May, 98,400 units were produced with the following costs:
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Direct materials used (24,000 pounds at $8.40)
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$201,600
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Direct labor (50,000 hours at $7.80)
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390,000
|
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Variable manufacturing overhead
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249,000
|
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Fixed manufacturing overhead
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145,000
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Required: Compute the materials price and usage variances, the labor rate and efficiency variances and the overhead budget and volume variances. (Overhead is applied based on units produced.)