exercise 9.22

Required: Using the rule provided, identify the eases that will be investigated. Suppose that investigation reveals that the cause of an unfavorable direct labor efficiency variance is the use of lower quality direct materials than are usually used. Who is responsible? What corrective action would likely be taken? Suppose that investigation reveals that the cause of a significant favorable direct labor efficiency variance is attributable to a new approach to manufacturing that takes less labor time but causes more direct materials waste. Upon examining the direct materials usage variance, it is discovered to be unfavorable, and it is larger than the favorable direct labor efficiency variance. Who is responsible? What action should be taken? How would your answer change if the unfavorable variance were smaller than the favorable? Overhead Variances, Four-Variance Analysis, Journal Entries Laughlin, Inc., uses standard costing system. The predetermined overhead rates are calculated using practical capacity, Practical capacity for a year is defined as 1,000,000 units required 2000,000 standard direct labor hours. Budgeted overhead for the year is $750,000, of $300,000 is fixed overhead. During the year, 900,000 units were produced using 190,000 direct labor hours. Actual annual overhead costs totaled $800,000, of which $294, 700 is fixed overhead. Required: Calculate the fixed overhead spending and volume variances. Explain the meaning of the volume variance to the manager ol Laughlin. Calculate the variable overhead spending and efficiency variances. Is the spending variance the same as the direct materials price variance? If not, explain how it differs. Prepare the journal entries that reflect the following: Assignment of overhead to production Recognition of the incurrence of actual overhead Recognition of overhead variances Closing out overhead variances, assuming they are not material CPA-TYPE EXERCISES (2011 CPA Exam) Which Of the following typs of variances would a purchasing Direct materials price Direct materials quantity Direct labor rate Direct labor efficiency