Question:
Manlow Company makes a cologne called Allure. The standard cost for one bottle of Allure is as follows.
|
Standard
|
|
Manufacturing Cost Elements
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Quantity
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x Price
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Cost
|
|
Direct materials
|
6 oz.
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x $ 0.90
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$ 5.40
|
|
Direct labor
|
0.5 hrs.
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x $12.00
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6.00
|
|
Manufacturing overhead
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0.5 hrs.
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x $ 4.80
|
2.40
|
|
|
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$13.80
|
During the month, the following transactions occurred in manufacturing 10,000 bottles of Allure.
1. 58,000 ounces of materials were purchased at $1.00 per ounce.
2. All the materials purchased were used to produce the 10,000 bottles of Allure.
3. 4,900 direct labor hours were worked at a total labor cost of $56,350.
4. Variable manufacturing overhead incurred was $15,000 and fixed overhead incurred was $10,400.
The manufacturing overhead rate of $4.80 is based on a normal capacity of 5,200 direct labor hours. The total budget at this capacity is $10,400 fixed and $14,560 variable.
Instructions
(a) Compute the total variance and the variances for direct material and direct labor elements.
(b) Compute the total variance for manufacturing overhead.