Determine all variances (Learning Objectives 4, 5)
Avanti manufactures embroidered jackets. The company prepares flexible budgets and uses a standard cost system to control manufacturing costs. The following standard unit cost of a jacket is based on the static budget volume of 14,000 jackets per month:

Data for November of the current year include the following:

a. Actual production was 13,600 jackets.

b. Actual direct materials usage was 2.70 square feet per jacket at an actual cost of $4.15 per square foot.

c. Actual direct labor usage of 24,480 hours cost $235,008.

d. Total actual overhead cost was $79,000.
Requirements 1. Compute the price and efficiency variances for direct materials and direct labor.
2. For manufacturing overhead, compute the total variance, the flexible budget variance, and the production volume variance.
3. Avanti’s management intentionally purchased superior materials for November production. How did this decision affect the other cost variances? Overall, was the decision wise? Explain.

Transcribed Image Text:

Direct materials (3.0 sq. ft x $4.00 per sq. ft)............. Direct labor (2 hours x $9.40 per hour)................ Manufacturing overhead: Variable (2 hours x $0.65 per hour)...... Fixed (2 hours x $2.20 per hour). Total cost per jacket............... $ 12.00 18.80 .......... $1.30 4.40 5.70 $36.50