During 2017, the Malaysia Division of Acro-Cel Tool and Machine had specialized in the production of a single heavy-duty motorcycle component. Original engineering estimates and the use of Acro-Cel's total overhead flexible budget had yielded the following standard cost per unit based on an expected production output and sales of 10,000 units:

STANDARD COST

Direct materials 10 lbs. @ $1.50 per lb. = $15.00

Direct labor 2 hours @ $6.00 per hr. = 12.00

Variable overhead 2 hours @ $1.00 per direct labor hr. = 2.00

Fixed overhead 2 hours @ $4.00 per direct labor = 8.00

Total standard cost $37.00

Tom, the Malaysia Division shop foreman, tends to communicate in brief, blunt reports. His analysis of 2017 is reproduced below:

As usual, the yo-yos in Purchasing and Personnel goofed and are trying to pass the buck to us. Your hotshot planners predicted an average wage rate of $6.00, and then your bleeding heart labor negotiators conceded to $6.60 an hour, for a 10% overrun. On top of that, Purchasing paid $1.80 per pound for materials they should have gotten for $1.50, or a whopping 20% over expenditure. Given that kind of incompetence, I feel the Malaysia production line deserves a big thank-you for holding actual total costs per unit down to $41.58, which works out to 12.4% over standard.

ACTUAL EXPENDITURES:

Direct materials $226,800 Total manufacturing cost $498,920

Direct labor $166,320 Actual output and sales 12,000 units

Variable overhead $24,800 Actual manufacturing

Fixed overhead $81,000 cost per unit $41.58

1. Tom's report is difficult to reconcile with a complaint from the controller's office that the Malaysia Division's cash expenditures were almost 35% higher than originally budgeted and had placed a severe strain on Acro-Cel's relationship with the bank. Rework Tom's report into a detailed variance analysis as best as you can.