Sasha Clothiers is a small company that manufactures oversize suits. The company uses a standard cost accounting system. In May 2016, it produced 11,200 suits.

The following standard and actual cost data applied to the labour hours. All materials purchased were used.

Overhead is applied based on direct labour hours. At normal capacity, the budgeted fixed overhead costs are $49,000, and the budgeted variable overhead is $36,400.
Instructions
(a) Calculate all of the materials and labour variances.
(b) Calculate the total overhead budget and volume variances.
(c) Which of the materials and labour variances should be investigated if management considers a variance of more than 4% from standard to be significant?

Transcribed Image Text:

Cost Element Standard (per unit) Direct materials 8 m at $4.40 per metre Direct labour1.2 hours at $13.40 per hour Overhead Actual $375,575 for 90,500 m ($4.15 per metre) $200,220 for 14,200 hours ($14.10 per hour) $49,000 fixed overhead $37,000 variable overhead 1.2 hours at $6.10 per hour (fixed $3.50; variable $2.60)