Using the information in P11.3, compute the overhead controllable variance and the overhead volume variance.

P11.3

Rudd Clothiers is a small company that manufactures tall-men’s suits. The company has used a standard cost accounting system. In May 2022, 11,250 suits were produced. The following standard and actual cost data applied to the month of May when the normal capacity was 14,000 direct labor hours. All materials purchased were used.

Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $49,000, and budgeted variable overhead was $36,400.

Instructions

a. Compute the total, price, and quantity variances for (1) materials and (2) labor.

b. Compute the total overhead variance.

c. Which of the materials and labor variances should be investigated if management considers a variance of more than 4% from standard to be significant?

Transcribed Image Text:

Cost Component Direct materials Direct labor Overhead Standard (per unit) 8 yards at $4.40 per yard 1.2 hours at $13.40 per hour 1.2 hours at $6.10 per hour (fixed $3.50; variable $2.60) Actual $375,575 for 90,500 yards ($4.15 per yard) $200,925 for 14,250 hours ($14.10 per hour) $49,000 fixed overhead. $37,000 variable overhead