Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Clarissa McWhirter, vice-president of Cyprus Company, was pleased to see a small variance on the income statement after the trouble the company had been having
Clarissa McWhirter, vice-president of Cyprus Company, was pleased to see a small variance on the income statement after the trouble the company had been having in controlling manufacturing costs. She noted that the $18,500 overall manufacturing variance reported last period was well below the 3% limit that had been set for variances. The company produces and sells a single product. The standard cost card for the product follows:
Standard Cost CardPer Unit | |||
Direct materials, 4 metres at $3.00 per metre | $ | 12 | |
Direct labour, 1.5 direct labour-hour at $16 per direct labour-hour | 24 | ||
Variable overhead, 1.5 direct labour-hour at $4 per direct labour-hour | 6 | ||
Fixed overhead, 1.5 direct labour-hour at $6 per direct labour-hour | 9 | ||
Standard cost per unit | $ | 51 | |
The following additional information is available for the year just completed:
- The company manufactured 20,000 units of product during the year.
- A total of 78,000 metres of material was purchased during the year at a cost of $3.25 per metre. All of this material was used to manufacture the 20,000 units. There were no beginning or ending inventories for the year.
- The company worked 32,500 direct labour-hours during the year at a cost of $15 per hour.
- Overhead cost is applied to products on the basis of standard direct labour-hours. Data relating to manufacturing overhead costs follow:
Denominator activity level (direct labour-hours) | 25,000 | ||
Budgeted fixed overhead costs (from the flexible budget) | $ | 150,000 | |
Actual fixed overhead costs | $ | 148,000 | |
Actual variable overhead costs | $ | 123,500 | |
4. Compute the total variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) X Answer is complete but not entirely correct. Total variance $ 32,500 X F
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started