Q1) Headsmart produces headphone cases. In September 2011, company made 106,000 cases and recorded cost data given below:
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Standard Cost Information
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Quantity
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Price
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Direct materials
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2 parts
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$0.17 per part
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Direct labor
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0.02 hours
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$9.00 per hour
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Variable manufacturing overhead
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0.02 hours
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$10.00 per hour
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Fixed manufacturing overhead ($32,640 for static budget volume of 96,000 units and 1,920 units and 1,920 hours, or $17 per hour)
Direct materials (265,000 parts were bought at $0.22 per part, 215,000 parts were used)
Direct labor (1,700 hours at $9.10 per hour=$15,652)
Manufacturing overhead $60,500 (30% was fixed)
a) Find out eight variances
1. Materials: VP=(AP-SP)AQ-(actual price-standard price)*actual quantity
VQ=(AQ-SQ)*SP
2. Direct labor: VP=(AP-SP)*AQ and VQ=(AQ-SQ)*SP
3. Variable overhead: VP=(AP-SP)*AQ and VQ=(AQ-SQ)*SP
4. Fixed overhead: SPENDING VARIANCE= actual fixed overhead incurred- fixed factory overhead budgeting
Production volume variance = fixed factory overhead budgeting - standard fixed overhead applied
b) Comment on variances