Question
7-33 Flexible budget, direct materials, and direct manufacturing labour variances. Emerald Statuary manufactures bust statues of famous historical figures. All statues are the same size.
7-33 Flexible budget, direct materials, and direct manufacturing labour variances. Emerald Statuary manufactures bust statues of famous historical figures. All statues are the same size. Each unit requires the same amount of resources. The following information is from the static budget for 2021:
Expected production and sales Expected selling price per unit Total fixed costs | 7,000 units $ 680 $1,400,000 |
Standard quantities, standard prices, and standard unit costs follow for direct materials and direct manufacturing labour: Standard Quantity Standard Price Standard Unit Cost Standard quantity Standard price Standard unit cost
Direct materials Direct manufacturing labour | 10 kilograms 3.7 hours | $ 8 per kilogram $50 per hour | $ 80 $185 |
During 2021, actual number of units produced and sold was 4,800, at an average selling price of $720. Actual cost of direct materials used was $392,700, based on 66,000 kilograms purchased at $5.95 per kilogram. Direct manufacturing labour-hours actually used were 18,300, at the rate of $48 per hour. As a result, actual direct manufacturing labour costs were $878,400. Actual fixed costs were $1,170,000. There were no beginning or ending inventories. Required 1. Calculate the sales-volume variance and flexible-budget variance for operating income. 2. Compute price and efficiency variances for direct materials and direct manufacturing labour.
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