Nancini manufactures embroidered jackets. The company prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a jacket is based on static budget volume of 14,000 jackets per month:

Actual cost and production information:

a. Actual production was 13,600 jackets.

b. Actual direct materials usage was 2.8 square feet per jacket, at an actual price of \(\$ 4.10\) per square foot.

c. Actual direct labor usage of 25,000 hours at a total cost of \(\$ 237,500\)

d. Total actual overhead cost was \(\$ 79,000\).

Requirements 

1. Compute the price and efficiencr variances for direct materials and direct labor.

2. Journalize the usage of direct materials and the assignment of direct labor, including the related variances.

3. For manufacturing overhead, compute the total variance, the flexible budget variance, and the production volume variance. Remember that the fixed overhead in the flexible budget equals the fixed overhead in the static budget.

4. Mancini's management intentionally purchased superior materials for November production. How did this decision affect the cost variances? Orerall, was the decision wise?

Transcribed Image Text:

Direct materials (3.0 sq. ft @ $4.00 per sq. ft) Direct labor (2 hours @ 59.40 per hour) $12.00 18.80 Manufacturing overhead: Variable (2 hours @ $0.65 per hour) $1.30 Fixed (2 hours @ $2.20 per hour) 4.40 5.70 Total cost per jacket $36.50