Question
Brianna Inc. produces e-book readers using a standard costing system. Each reader sells for $75. The following is the standard cost to produce one reader:
Brianna Inc. produces e-book readers using a standard costing system. Each reader sells for
$75. The following is the standard cost to produce one reader:
9 units of direct materials are required at a cost of $3 per unit.
2.5 hours of direct labour are required at a cost of $6 per hour.
Manufacturing overhead is based on 2.5 direct labour hours per unit at a cost of $3.56 per hour. The manufacturing overhead is based on a budgeted level of 50,000 direct labour hours, and the total budgeted fixed overhead is $106,000.
At the end of the current production year, Brianna Inc. had produced and sold 17,500 readers at a selling price of $80 each. The following production costs were realized:
47,250 direct labour hours were used at a cost of $576,450.
160,000 direct materials units were purchased at a cost of $3.05 per unit. All direct materials were used in production for the year.
Overhead costs were $63,000 variable and $110,000 fixed.
Required:
a) Prepare the static and flexible budgets compared to actual and calculate the total variances.
b) Calculate the direct materials price and quantity variances and the direct labour rate and efficiency variances.
c) Calculate the overhead variances (variable rate and efficiency, fixed manufacturing overhead budget and fixed manufacturing overhead volume).
Brianna Inc. produces e-book readers using a standard costing system. Each reader sells for
$75. The following is the standard cost to produce one reader:
9 units of direct materials are required at a cost of $3 per unit.
2.5 hours of direct labour are required at a cost of $6 per hour.
Manufacturing overhead is based on 2.5 direct labour hours per unit at a cost of $3.56 per hour. The manufacturing overhead is based on a budgeted level of 50,000 direct labour hours, and the total budgeted fixed overhead is $106,000.
At the end of the current production year, Brianna Inc. had produced and sold 17,500 readers at a selling price of $80 each. The following production costs were realized:
47,250 direct labour hours were used at a cost of $576,450.
160,000 direct materials units were purchased at a cost of $3.05 per unit. All direct materials were used in production for the year.
Overhead costs were $63,000 variable and $110,000 fixed.
Required:
a) Prepare the static and flexible budgets compared to actual and calculate the total variances.
b) Calculate the direct materials price and quantity variances and the direct labour rate and efficiency variances.
c) Calculate the overhead variances (variable rate and efficiency, fixed manufacturing overhead budget and fixed manufacturing overhead volume).
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