Clinton Company uses a standard process costing system in accounting for its one product, which is produced in one department. All materials are added at the beginning of the process. The standard cost card for one unit of product follows:
Materials: 3 units at $6.00 per unit ....................................................$18.00
Direct labor: 1/4 hour at $10.00 per hour ............................................. 2.50
Variable factory overhead: 1/4 hour at $2.00 per labor hour ....................... .50
Fixed factory overhead: 1/4 hour at $8.00 per labor hour ........................... 2.00
Total ........................................................................................$23.00
Budgeted capacity is 8,500 direct labor hours for November. Actual data for November are as follows:
(a) Beginning work in process inventory was 5,000 units (40% converted).
(b) Ending work in process inventory was 2,000 units (80% converted).
(c) 32,000 units of product were transferred to finished goods during November.
(d) Actual costs incurred:
Materials purchased ...............100,000 units at $6.54 (recorded at standard cost)
Materials used ......................92,000 units
Direct labor .........................8,000 hours at $10.60
Factory overhead ...................$75,000
Required:
(1) Compute the equivalent units and the standard quantity allowed for each element of cost for November
(2) Compute the materials purchase price, inventory, and quantity variances, the labor rate and efficiency variances, and the factory overhead spending, variable efficiency, and volume variances. Indicate whether the variances are favorable or unfavorable.