Question
(18 pts) 6. Taylor Desmond is a cost accountant and business analyst for Doorknob Design Company (DDC), which manufactures expensive brass doorknobs. DDC uses
(18 pts) 6. Taylor Desmond is a cost accountant and business analyst for Doorknob Design Company (DDC), which manufactures expensive brass doorknobs. DDC uses two direct cost categories: direct materials and direct manufacturing labor. Desmond feels that manufacturing overhead is most closely related to direct manufacturing labor hours. Therefore, DDC allocates manufacturing overhead to production based upon direct labor hours. At the beginning of 2021, DDC budgeted annual production of 400,000 doorknobs and adopted the following standards for each doorknob: Input Direct materials (brass) Direct manufacturing labor Manufacturing overhead: Cost/Doorknob 0.3 lb. @ $10/lb. $ 3.00 1.2 hours @ $20/hour 24.00 $1.50/hr. x 1.2 hours 1.80 $3.75/hr. x 1.2 hours 4.50 Standard cost per doorknob $33.30 Variable Fixed Actual results for November 2021 were as follows: Production Direct materials purchased Direct materials used Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead Required: 10,450 lb. 35,000 doorknobs 12,000 lb. at $11/lb. 38,500 hours for $808,500 $64,150 $152,000 a) For the month of November, compute the following variances, indicating whether each is favorable (F) or unfavorable (U): 1. Direct materials price variance (based on purchases) 2. Direct materials efficiency variance 3. Direct manufacturing labor price variance 4. Direct manufacturing labor efficiency variance 5. Variable manufacturing overhead spending variance 6. Variable manufacturing overhead efficiency variance 7. Production-volume variance 8. Fixed manufacturing overhead spending variance b) Discuss the possible explanation for the variances.
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