Data Table At the beginning of 2017, DDC budgeted annual production of 430,000 doorknobs and adopted the following standards for each doorknob: Input Cost/Doorknob Direct materials (brass) 0.3 lb. @ $8/lb. $ 2.40 Direct manufacturing labor 1.2 hours @ $20/hour 24.00 Variable manufacturing overhead $4/lb x 0.3 lb. 1.20 4.20 Fixed manufacturing overhead $14/lb. x 0.3 lb. $ 31.80 Standard cost per doorknob Data Table Actual results for April 2017 were as follows: Production 25,000 doorknobs Direct materials purchased 13,100 lb. at $9/lb. Direct materials used 7,000 lbs. Direct manufacturing labor 29,000 hours for $638,000 Variable manufacturing overhead $64,600 Fixed manufacturing overhead $157,000 4. Nathan Dickens is a cost accountant and business analyst for Daisy Design Company (DDC), which manufactures expensive brass doorknobs. DDC uses two direct-cost categories direct materials and direct manufacturing labor. Dickens feels that manufacturing overhead is most closely related to material usage. Therefore, DDC allocates manufacturing overhead to production based upon pounds of materials used. Click the Icon to view the standards.) Click the icon to view the actual results for April.) Read the requirements 8. Requirement 1. For the month of April, compute the variances, indicating whether each is favorable (F) or unfavorable (U). Before computing the variances complete the tables below. Begin by completing the table for direct materials. Actual Input Qty. * Budgeted Price Actual Costs Incurred Flexible Budget Purchases Usage Direct materials a. Direct materials price variance (based on purchases) is b. The direct materials officiency variance is (2) Now complete the table for direct labor. Actual Costs Actual Input Qty. * Incurred Budgeted Price Direct Manuf, Labor c. The direct manufacturing labor price variance is Flexible Budget (3) d. The direct manufacturing labor efficiency variance is Next, complete the table for variable overhead. (Abbreviation used: Manuf = Manufacturing) Actual Costs Actual Input Qty. Flexible Allocated Incurred Budgeted Price Budget Overhead Variable Manuf. OH e. The variable manufacturing overhead spending variance is (5) (8) 1. The variable manufacturing overhead efficiency variance is Complete the table for fixed overhead. Same Budgeted Lump Actual Costs Sum Regardless Incurred of Output Level Flexible Allocated Budget Overhead Fixed Manuf. OH g. The production-volume variance is (7) (8) brass h. The fixed manufacturing overhead spending varlance is Requirement 2. Can Dickens uso any of the variances to help explain any of the other variances? Give examples. The direct materials price variance indicates that DDC paid (9) for brass than they had planned. If this is because they purchased a (10) quality brass. It may explain why they used (11) than expected (leading to a[n) (12). material officiency variance). In turn, since variable manufacturing overhead is assigned based on pounds of materials used, this directly led to the (13) variable overhead officiency variance. The purchase of this quality of brass may also explain why it took (14) labor time to produce the doorknobs than expected (the (15) direct labor efficiency variance) Finally, the (16) - direct labor price variance could imply that the workers who were hired wero (17) experienced than expected, which could also be related to the (18) direct material and direct labor efficiency variances. 1: Data Table At the beginning of 2017, DDC budgeted annual production of 430,000 doorknobs and adopted the following standards for each docrinob: Input Cost/Doorknob Direct materials (brass) 0.3 lb. @ $8/1b $ 2.40 Direct manufacturing labor 1.2 hours @ $20/hour 24.00 Variable manufacturing overhead $4/b x 0.3 lb. 1.20 Fixed manufacturing overhead $14/1b.x 0.3 lb. 4.20 $ 31.80 Standard cost per doorknob 2: Data Table Actual results for April 2017 were as follows: Production Direct materials purchased Direct materials used Direct manufacturing labor Variable manufacturing overhond Fixed manufacturing overhead 25,000 doorknobs 13,100 lb. at $9/b. 7,000 lbs. 29,000 hours for $638,000 $64,600 $157,000 3: Requirements 1. For the month of April, compute the following variances, indicating whether each is favorable (F) or unfavorable (U). a. Direct materials price variance (based on purchases) b. Direct materials efficiency variance c. Direct manufacturing labor price variance d. Direct manufacturing labor efficiency variance e. Variable manufacturing overhead spending variance f. Variable manufacturing overhead efficiency variance g. Production-volume variance h. Fixed manufacturing overhead spending variance 2. Can Dickens use any of the variances to help explain any of the other variances? Give examples. (1) O OF (2) O OF OU (3) O OF OU (4) O OF OU (5) O OF OU (6) O OF OU (7) O OU OF (8) O OF OU OU less 00 (10) O higher O lower (11) O less O more (12) O favorable (13) O favorable O unfavorable O unfavorable more (14) O less more (15) O favorable O unfavorable (16) O favorable O unfavorable (17) O less O more (18) O negative positive
