Direct materials and direct manufacturing labour variances. GloriaDee Inc. designs and aig manufactures T-shirts. It sells its

Question:

Direct materials and direct manufacturing labour variances. GloriaDee Inc. designs and aig manufactures T-shirts. It sells its T-shirts to brand-name clothing retailers in lots of one pesca exible PIG dozen. GloriaDee’s May 2009 static budget and actual results for direct inputs are:image text in transcribed

GloriaDee has a policy of analyzing all input variances when they add up to more than 10% of the total cost of materials and labour in the flexible budget, and this is true in May 2009. The production manager discusses the sources of the variances: “A new type of material was purchased in May. This led to faster cutting and sewing, but the workers used more material than usual as they learned to work with it. For now, the standards are fine.”
REQUIRED 1. Calculate the direct materials and direct manufacturing labour price and efficiency variances in May 2009. What is the total flexible-budget variance for both inputs (direct materials and direct manufacturing labour) combined? What percentage is this variance of the total cost of direct materials and direct manufacturing labour in the flexible budget?
2. Gloria Denham, the CEO, is concerned about the input variances. However, she likes the quality and feel of the new material and agrees to use it for one more year. In May 2010, GloriaDee again produces 550 lots of T-shirts. Relative to May 2009, 2% less direct material is used, direct material price is down 5%, and 2% less direct manufacturing labour is used. Labour price has remained the same as in May 2009. Calculate the direct materials and direct manufacturing labour price and efficiency variances in May 2010. What is the total flexible-budget variance for both inputs (direct materials and direct manufacturing labour) combined? What percentage is this variance of the total cost of direct materials and direct manufacturing labour in the flexible budget?
3. Comment on the May 2010 results. Would you continue the “experiment” of using the new material?
LO1

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Cost Accounting A Managerial Emphasis

ISBN: 9780135004937

5th Canadian Edition

Authors: Charles T. Horngren, Foster George, Srikand M. Datar, Maureen P. Gowing

Question Posted: