Question
Basic Variance Analysis, Revision of Standards, Journal Entries Petrillo Company produces engine parts for large motors. The company uses a standard cost system for production
Basic Variance Analysis, Revision of Standards, Journal Entries
Petrillo Company produces engine parts for large motors. The company uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products (a valve) is as follows:
Direct materials (7 lbs. @ $5.40) | $37.80 |
Direct labor (1.75 hrs. @ $18) | 31.50 |
Variable overhead (1.75 hrs. @ $4.00) | 7.00 |
Fixed overhead (1.75 hrs. @ $3.00) | 5.25 |
Standard cost per unit | $81.55 |
During the year, Petrillo had the following activity related to valve production:
- Production of valves totaled 20,600 units.
- A total of 135,500 pounds of direct materials was purchased at $5.36 per pound.
- There were 10,000 pounds of direct materials in beginning inventory (carried at $5.40 per pound). There was no ending inventory.
- The company used 36,500 direct labor hours at a total cost of $656,270.
- Actual fixed overhead totaled $111,000.
- Actual variable overhead totaled $169,000.
Petrillo produces all of its valves in a single plant. Normal activity is 20,000 units per year. Standard overhead rates are computed based on normal activity measured in standard direct labor hours.
Required:
3. Compute overhead variances using a two-variance analysis.
Budget Variance | ??????? |
|
Volume Variance | ?????? |
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