Question
Borg Power Trains produces drive-train components for all-wheel drive automobiles. For simplicity, assume the company produces two products, a transfer case and a transmission clutch.
Borg Power Trains produces drive-train components for all-wheel drive automobiles. For simplicity, assume the company produces two products, a transfer case and a transmission clutch. Products are made of aluminum, screws, glue, and gasket material. You will be calculating direct materials variances for aluminum only. The transmission clutch requires 3 pounds of aluminum, 5 screws, 6 inches of gasket material and an ounce of glue. The transfer case requires 5 pounds of aluminum, 7 screws, 17 inches of gasket material, and 2 ounces of glue. The standard cost of materials is $0.70 per pound for aluminum, $0.20 per screw, $0.40 per inch for gasket material, and $0.50 per ounce for glue. The standard labor rate is $37.2 per hour, variable overhead is charged at a rate of $10.12 per machine-hour, and fixed overhead is charged at a rate of $5.00 per machine-hour. Each product is estimated to take 15 minutes or 1/4 of a machine hour. The clutch uses 1/4 of a labor hour and the transfer case used 0.35 hours. In July, Borg purchased 80,000 pounds of aluminum for $65,000; 120,000 screws for $25,000; 240,000 inches of gasket material for $95,000 and 32,000 ounces of glue for $15,000. In July, the company produced 10,000 clutches and 9,000 transfer cases. In doing so, it used 76,000 pounds of aluminum, 113,300 screws, 211,000 inches of gasket material, and 27,000 ounces of glue. Actual machine hours were 4,800. It spent $205,000 on 5,500 hours of direct labor, $39,000 on items of fixed overhead that had been budgeted at $23,750, and $34,500 on items of variable overhead. Report the following:
- Material Price Variance for aluminum.
- Material usage variance for aluminum.
- Labor rate variance.
- Labor efficiency variance.
- Total overhead spending variance.
- Overhead efficiency variance.
- Overhead production volume variance.
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