Question
Cole Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. Cole allocates overhead based on yards of direct materials. The company's
Cole Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. Cole allocates overhead based on yards of direct materials. The company's performance report includes the following selected data:
Requirement 2. Compute the cost variance and the efficiency variance for direct materials and for direct labor. For manufacturing overhead, compute the variable overhead cost, variable overhead efficiency, fixed overhead cost, and fixed overhead volume variances. Round to the nearest dollar.
Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U).
Requirement 3. Have Cole's managers done a good job or a poor job controlling materials, labor, and overhead costs? Why?
The variances computed in Req. 2 suggest that the manager have done a ___________ (good, poor, reasonable) job controlling materials and labor costs. The _________ (favorable, unfavorable) direct materials cost variance and direct labor efficiency variance help offset the _________ (favorable, unfavorable) direct labor cost variance and direct materials efficiency variance. Managers have done a ______________ (good, poor, reasonable) job controlling overhead costs as evidenced by the fact that _________ (all, none, some) of the overhead variances are _______ (favorable, unfavorable).
Requirement 4. Describe how Cole's managers can benefit from the standard costing system.
Formula Variance Direct materials cost variance Direct labor cost variance Standard costing helps managers do the followingStep by Step Solution
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