| Actual fixed MOH $75,000 Standards: Direct materials 18.0 yards per awning at $15.00 per yard Direct labor 3.0 hours per awning at $12.00 per hour Variable MOH standard rate $8.00 per direct labor hour Predetermined fixed MOH standard rate $12.00 per direct labor hour Total budgeted fixed MOH cost $69,500 Requirement 1. Calculate the standard cost of one awning. | Standard cost | Standard cost per unit | | Direct materials | 270 | | Direct labor | 36 | | Variable MOH | 24 | | Fixed MOH | 36 | | Total standard cost | 366 | Requirement 2a. Calculate the direct material variances. (Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U). Abbreviations used: DM= Direct materials.) First determine the formula for the price variance, then compute the price variance for direct materials. | | Actual quantity purchased | x ( | Standard price | - | Actual price | ) | = | DM price variance | | | 39000 | x ( | 15 | - | 14.70 | ) | = | 11700 | F | Determine the formula for the quantity variance, then compute the quantity variance for direct materials. | | Standard price | x ( | Standard quantity allowed | - | Actual quantity used | ) | = | DM quantity variance | | | 15 | x ( | 36000 | - | 39000 | ) | = | 45000 | U | Requirement 2b. Calculate the direct labor variances. (Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U). Abbreviations used: DL = Direct labor.) First determine the formula for the rate variance, then compute the rate variance for direct labor. | | Actual hours | x ( | Standard rate | - | Actual rate | ) | = | DL rate variance | | | 5860 | x ( | 12 | - | 12.10 | ) | = | 586 | U | First determine the formula for the efficiency variance, then compute the efficiency variance for direct labor. | | Standard rate | x ( | Standard hours allowed | - | Actual hours | ) | = | DL efficiency variance | | | 12 | x ( | 6000 | - | 5860 | ) | = | 1680 | F | Requirement 2c. Calculate the variable manufacturing overhead variances. (Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U).) First determine the formula for the rate variance, then compute the rate variance for variable manufacturing overhead. (Round interim calculations to the nearest cent.) | | | | | | | | | Variable overhead | | | | x ( | | - | | ) | = | rate variance | | | | x ( | | - | | ) | = | | | Now compute the variable manufacturing overhead efficiency variance. First determine the formula for the efficiency variance, then compute the efficiency variance for variable manufacturing overhead. | | | | | | | | | Variable overhead | | | | x ( | | - | | ) | = | efficiency variance | | | | x ( | | - | | ) | = | | | Requirement 2d. Calculate the fixed manufacturing overhead variances. (Enter the variance as a positive number. Label the variance as favorable (F) or unfavorable (U).) Begin by computing the fixed manufacturing overhead budget variance. First determine the formula for the budget variance, then compute the budget variance for fixed manufacturing overhead. | | | | | | Fixed MOH | | | | - | | = | budget variance | | | | - | | = | | | Now compute the fixed manufacturing overhead volume variance. First determine the formula for the volume variance, then compute the volume variance for fixed manufacturing overhead. | | | | | | Fixed MOH | | | | - | | = | volume variance | | | | - | | = | | | Requirement 3.Explain what each of the variances you calculated means and give at least one possible explanation for each of those variances. Direct materials: | Variance | Meaning | Possible explanation | | DM price | | | | DM quantity | | | Direct Labor: | Variance | Meaning | Possible explanation | | DL rate | | | | DM efficiency | | | Variable manufacturing overhead: | Variance | Meaning | Possible explanation | | VOH rate | | | | | | | | VOH efficiency | | | | | | | Fixed manufacturing overhead: | Variance | Meaning | Possible explanation | | FOH budget | | | | | | | | FOH volume | | | | | | | Are any of the variances likely to be interrelated? The favorable DL efficiency favorable DM quantity unfavorable DL efficiency unfavorable DM quantity variance is likely to be related to the favorable DL rate favorable DM price unfavorable DL rate unfavorable DM price variance. It is likely that ParsonParson Awning hired less qualified employees at a lower rate hired more qualified employees at a higher rate purchased higher quality materials at a higher price purchased lower quality materials at a lower price . This may have resulted in | 
