Question
Assume that Schmidt Machinery Company had the standard costs reflected in Exhibit 14.5. In a given month, the company used 3,860 pounds of aluminum to
Assume that Schmidt Machinery Company had the standard costs reflected in Exhibit 14.5. In a given month, the company used 3,860 pounds of aluminum to manufacture 939 units. The company paid $28.00 per pound during the month to purchase aluminum. At the beginning of the month, the company had 69 pounds of aluminum on hand. At the end of the month, the company had only 49 pounds of aluminum in its warehouse. Schmidt used 4,650 direct labor hours during the month, at an average cost of $42.30 per hour.
Required: Compute for the month the following variances: 1. The purchase-price variance for aluminum. Indicate whether this variance is favorable (F) or unfavorable (U).
2. The usage variance for aluminum. Indicate whether this variance is favorable (F) or unfavorable (U).
3. The direct labor rate variance. Indicate whether this variance is favorable (F) or unfavorable (U).
4. The direct labor efficiency variance. Indicate whether this variance is favorable (F) or unfavorable (U).
1. | Purchase-price variance | ? | ? |
2. | Usage variance | ? | ? |
3. | Direct labor rate variance | ? | ? |
4. | Efficiency variance | ? | ? |
EXHIBIT 14.5 Standard Cost Sheet, Product XV-1 SCHMIDT MACHINERY COMPANY Standard Cost Sheet Product: XV-1 Descriptions Quantity Cost Rate Subtotal Total Direct materials Aluminum 4 pounds$25/pound $100 40 200 12/hour 60 PVC Direct labor Variable factory overhead Total variable manufacturing cost Fixed factory overhead Standard manufacturing cost per unit Standard variable selling and administrative cost per unit I pound 5 hours 5 hours 40/pound 40/hour $400 120 120 $520 50 5 hours 24/hour "Budgeted fixed factory overhead cost = $120,000
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