Chapter 13: Flexible Budgets, Cost Variances, and Management Control

Lecture Example Winter2017

Last month, the following events took place at Superior Supplies:

Produced 100,000 leather-like digital music player cases.

Had budgeted (or standard)variable costs per unit (that is, per case):

Direct materials: 3 pounds at $1.50 . . . . . . . . . . . . ..$ 4.50

Direct labor: 0.20 labor-hours at $22.50. . . . . . . 4.50

Variable production overhead:

.20 labor-hours at $10.00 . . . . . ..2.00

Total per case. . . . . . . . . . . . . . . . . . . . . . . . . . . ..$11.00

Incurred actual production costs:

Direct materials purchased and used:

325,000 pounds at $1.40 . .. . ..$455,000

Direct labor: 19,000 labor-hours at $25 . . . . . . . .. 475,000

Variable overhead . . . . . . . . . . . . . . . . . . . . . . . 209,000

Required:

Compute the following:

5). Manufacturing variable production overhead spending variance

6). Manufacturing variable production overhead efficiency variance

Assume that the fixed production cost budget for the month was $320,000, and actual fixed production overhead costs were $332,000. The estimated monthly production was 80,000 cases (or 16,000 standard labor-hours).

Required:

7).Compute the fixed production overhead spending (or price) variance

8). Compute the fixed production overhead production volume variance.