St. Lawrence Iron Works, Ontario, Canada, uses standard costs and a flexible budget to control its manufacture
Question:
St. Lawrence Iron Works, Ontario, Canada, uses standard costs and a flexible budget to control its manufacture of cast iron. The purchase manager of the company is responsible for the material price variances whereas the production manager is responsible for all other variances. Operating data for September, 2020 are as follows:
a. Finished units produced: 150,000 pounds of cast iron.
b. Direct materials: Purchased and used, 495,000 pounds of iron at C$0.90 per pound; standard price is C$0.85 per pound. Standard allowed per pound of caste iron is 3 pounds.
c. Direct labor: Actual costs, 825,000 hours for C$6,352,500. Standard allowed per pound of caste iron is 5 hours. Standard price per direct-labor hour is C$8.00.
d. Variable manufacturing overhead: Actual costs, C$693,000. Budget formula is C$0.80 per standard direct-labor hour.
Compute the following:
1. a. Materials purchase-price variance
b. Materials quantity variance.
c. Direct-labor price variance.
d. Direct-labor quantity variance.
e. Variable manufacturing-overhead spending variance.
f. Variable manufacturing-overhead efficiency variance.
2. a. What is the budget allowance for direct labor?
b. Would it be any different if production were 160,000 pounds?
Step by Step Answer:
Introduction To Management Accounting
ISBN: 9781292412566
17th Edition, Global Edition
Authors: Charles Horngren, Gary L Sundem, Dave Burgstahler