Problem 1: Dillard, Inc. has developed the following standard cost data based on 60,000 direct labor hours, which is 75% of the firm's capacity. Fixed overhead is $360,000 and variable overhead is $180,000 at this level of activity.
|
Direct material (3 lbs. @ $2.00/lb.)
|
$ 6.00
|
|
Direct labor (0.5 hrs. @ $8.00/hr.)
|
4.00
|
|
Factory overhead (0.5 hrs. @ $9.00/hr.)
|
4.50
|
|
Total standard cost per unit
|
$14.50
|
During the last period, the company actually spent 62,000 direct labor-hours to produce 128,000 units and incurred the following manufacturing costs:
| Actual Cost incurred |
|
|
Direct material (380,000 lbs.)
|
$779,000
|
|
Direct labor (62,000 hrs.)
|
507,150
|
|
Fixed overhead
|
365,000
|
|
Variable overhead
|
220,000
|
Required:
Q1. Determine all variances for direct materials, direct labor, and factory overheads. Use the 4-variance method for factory overheads.
Q2. What are possible causes of each of the variances?