Elegance is a manufacturer of large flower pots for urban settings. The company has these standards:
Requirements
1. Compute the direct material price variance and the direct material quantity variance.
2. Who is generally responsible for each variance?
3. Interpret the variances.
i Standards Direct materials (resin) 9 pounds per pot at a cost of $5.00 per pound 2.0 hours at a cost of $20.00 per hour Direct labor Standard variable manufacturing overhead rate $5.00 per direct labor hour Budgeted fixed manufacturing rhead 1,600 Standard fixed MOH rate $13.00 per direct labor hour (DLH) Done Print i Actual Results Elegance allocated fixed manufacturing overhead to production based on standard dire ct labor hours. Last month, the company reported the following actual results for the production of 2,100 flower pots: Purchased 19,820 pounds at a cost of Direct materials $5.20 per pound; used 19,320 pounds to produce 2,100 pots Worked 2.5 hours per flower pot (5,250 Direct labor total DLH) at a cost of $18.00 per hour Actual variable manufacturing overhead $5.70 per direct labor hour for total actual variable manufacturing overhead of $29,925 $51,400 Actual fixed manufacturing overhead Standard fixed manufacturing overhead allocated based on actual production $54,600 Requirement 1. Compute the direct material price variance and the direct material quantity variance. (Enter the variances as positive numbers. Enter currency the formula to the nearest cent and then round the final variance amount to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U). amounts Abbreviations used: DM = Direct materials) First determine the formula for the price variance, then compute the price variance for direct materials. x( DM price variance ( Determine the formula for the quantity variance, then compute the quantity variance for direct material. DM quantity variance x ( ( Requirement 2. Who is generally responsible for each variance? department is responsible for the materials quantity variance The department is responsible for the materials price variance. The Requirement 3. Interpret the variances. the standard budgeted price for resin The materials price variance means that the actual price Watermate's personnel paid for resin resin than they should have to produce 2,100 pots. The materials quantity variance means that Watermate's employees used favorable unfavorable
