Assignment Task:
The Alma Ceramics Company manufactures and sells decorative ceramic pots. The August targets for this product were sales of 1,100 units at an average price of $130 each. During August Alma actually recorded revenues of $133,750 on a sales volume of 1,070 units.
The manufacturing budget for August was based on production of 1,000 units. Direct materials for each pot was budgeted at 2.5 lbs. at $1.50 per lb. The budget also called for 1.0 hour of direct labor per pot at $30 per hour. Variable overhead was budgeted to be applied using a pre-determined rate of $8.00 per direct labor hour. Similarly fixed overhead costs were budgeted at a pre-determined rate of $32 per direct labor hour. Even though Alma's current maximum production capacity is 1,400 pots per month all manufacturing costs were based on the production goal of 1,000 units for the month.
Alma actually produced 1,020 units during August and its accounting records indicate that they had a beginning materials inventory of 1,800 lbs., an ending materials inventory of 1,900 lbs., and used 3,100 lbs in production. Purchases of materials during the month cost $3,520. Also, during August employee records indicate 1,000 direct labor hours were used at an average cost of $31 per hour. Actual variable overhead costs incurred were $7,500 and $33,950 was spent for fixed overhead.
NOTE: If you calculate a variance as a negative number, be sure to include the negative sign in your answer. You do not have to include dollar signs. You may round your final answer to the nearest whole dollar.
Q1. Determine the: Direct Materials Price Variance (based on materials used)
Q2. Determine the: Direct Materials Quantity Variance (based on materials used)
Q3. Determine the: Direct Labor Rate Variance
Q4. Determine the: Direct Labor Efficiency Variance
Q5. Determine the: Variable overhead Spending or Price Variance
Q6. Determine the: Variable overhead Efficiency Variance
Q7. Determine the: Fixed overhead Price or Spending Variance
Q8. Determine the: Fixed overhead Production Volume Variance (based on FOH applied using actual labor hours)
Q9. Determine the: Sales Price Variance based on revenues.
Q10. Determine the: Sales Volume or Activity Variance based on revenues.