ABC Corp produces alphabet flash cards for grammar schools. They forecast that they will need to produce 90,000 sets of cards for the 2006-2007 school year. They budget they following costs for each set of cards.
Materials (1/2 pounds cardboard @ $1.5 per pound) | $.75 <- cost per set
Labor (1/4 hour @ $10 per hour) | $2.50 <- cost per set
Variable overheads (1/4 hour @ $5 per hour) | $1.25 <- cost per set
Fixed Overhead | $21,000 <- cost per set
Actual results for the academic year were:
Production | 80,000 sets of cards
Materials purchased and used | 38000 pounds @ 1.3 per pound
Actual Labor | 23,000 hours costing $245,000
Actual Variable Overhead| $130,000
Actual Fixed Overhead | $22,00
1. Prepare an analysis that shows the Volume Variance and Flex Variance using per unit costs and a static budget, a flexible budget and actual costs
2. Compute Material Price and Quantity Variances
3. Compute the Labor Rate and Efficiency Variance