8-39 Review of Chapters 7 and 8, 3-variance analysis. (CPA, adapted) The Brown Manufacturing

Companys costing system has two direct-cost categories: direct materials and direct manufacturing labor.

Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct

manufacturing labor-hours (DLH). At the beginning of 2014, Beal adopted the following standards for its

manufacturing costs:

Input Cost per Output Unit

Direct materials 5 lb. at $4 per lb. $ 20.00

Direct manufacturing labor 4 hrs. at $16 per hr. 64.00

Manufacturing overhead:

Variable $8 per DLH 32.00

Fixed $9 per DLH 36.00

Standard manufacturing cost per output unit $152.00

The denominator level for total manufacturing overhead per month in 2014 is 37,000 direct manufacturing

labor-hours. Beals flexible budget for January 2014 was based on this denominator level. The records for

January indicated the following:

Direct materials purchased 40,300 lb. at $3.80 per lb.

Direct materials used 37,300 lb.

Direct manufacturing labor 31,400 hrs. at $16.25 per hr.

Total actual manufacturing overhead (variable and fixed) $650,000

Actual production 7,600 output units

1. Prepare a schedule of total standard manufacturing costs for the 7,600 output units in January 2014.

2. For the month of January 2014, compute the following variances, indicating whether each is favorable

(F) or unfavorable (U):

a. Direct materials price variance, based on purchases

b. Direct materials efficiency variance

c. Direct manufacturing labor price variance

d. Direct manufacturing labor efficiency variance

e. Total manufacturing overhead spending variance

f. Variable manufacturing overhead efficiency variance

g. Production-volume variance