Question
2.Kool Clothing is a manufacturer of designer dresses. The cost of each dress is the sum of three variable costs (direct materials cost, direct manufacturing
2.Kool Clothing is a manufacturer of designer dresses. The cost of each dress is the sum of three variable costs (direct materials cost, direct manufacturing labor costs, and manufacturing overhead costs) and one fixed-cost category (manufacturing overhead costs). Variable manufacturing overhead costs are allocated to each dress on the basis of budgeted direct manufacturing labor-hours per dress. For April 2012, each dress is budgeted to take five labor-hours. Budgeted variable manufacturing cost per labor hour is $15. The budgeted number of dresses to be manufactured in April 2012 is 1,250.
Actual variable manufacturing costs in June 2012 were $65,688 for 1,360 dresses started and completed. There was no beginning or ending inventory of dresses. Actual direct manufacturing labor-hours for April were 5,712.
a.Compute the flexible-budget variance.
b.Compute the spending variance.
c.Compute the efficiency variance for variable manufacturing overhead.
d.Comment on the results for the requirements above and provide a possible explanation for them.
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