Question
Dunder Mifflin Paper Company has provided the following standard costing data, per unit below: Direct materials 90 kg at 4 $ per kg Direct labour
Dunder Mifflin Paper Company has provided the following standard costing data, per unit below:
Direct materials | 90 kg at 4 $ per kg |
Direct labour | 4 hours at 25 $ / hour |
Variable Overhead | 4 hours at 8 $ / DL hours |
Fixed Overhead | 30 $ |
The company expected to produce 1,100 units for the upcoming month, August 2016.
During August, 1,050 units were produced. The company purchased and used 97,000 kilograms of material at a total cost of $368,600. Direct labor used was 4,100 hours at a total cost of $110,700. Variable overhead cost was $35,200. Actual fixed overhead cost was $30,900. Fixed overhead is allocated based on direct labor hours. The normal volume is the same as the planned volume for August.
a. Compute the variable overhead spending variance. Indicate if it is favorable (F) or unfavorable (U).
b. Compute the variable overhead efficiency variance. Indicate if it is favorable (F) or unfavorable (U).
c. Compute the underapplied or overapplied variable overhead variance for the month. Indicate if it is favorable (F) or unfavorable (U).
*Answer question D ignoring your results in a-b-c above
d. Michael Scott has summoned you, his assistant Dwight, to his office. He tells you he is an expert on variance, but would like you to explain him:
-Is an unfavourable variance always negative? Provide an example to support your answer
-Is a favourable variance always positive? Provide an example to support your answer
-What could cause an unfavourable labour variance, and should managers always be punished for them? Explain your answer
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