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Chainspeaker Company produces digital thermometers. The firm began operations at the beginning of 2020 and uses a standard cost system. The standard costs for a
Chainspeaker Company produces digital thermometers. The firm began operations at the beginning of 2020 and uses a standard cost system. The standard costs for a thermometer are provided below: Direct material (0.5 kg. @ $1.00) Direct labour (1 hr. @ $10.00) Variable overhead (1 hr. @ $1.00) Fixed overhead (1 hr. @ $0.50) $0.50 $10.00 $1.00 $0.50 $12.00 The $0.50 fixed overhead rate is based on total budgeted fixed overhead costs of $17,000. There were no changes in any inventory account during the period. The company actually produced and sold 35,000 units at the following costs: Direct materials (18,000 kgs) Direct labour (36,000 hrs) Variable factory overhead Fixed factory overhead $17,280 $374,400 $34,500 $15,000 REQUIRED: 1. Compute the direct materials usage variance (2 marks) 2. Compute the direct labour rate variance (2 marks) 3. Compute the total variable overhead variance (2 marks) 4. Compute the fixed overhead spending variance (2 marks) 5. Compute the fixed overhead volume variance (2 marks) 6. Interpret the concept of volume variances. What can be done to reduce an unfavorable volume variance (or to increase a favorable volume variance)? (2 marks)
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