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EXTRA STUDY VARIANCE PROBLEM The following standards have been established in connection with the production of one unit of Product X: Cost per unit Direct

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EXTRA STUDY VARIANCE PROBLEM The following standards have been established in connection with the production of one unit of Product X: Cost per unit Direct materials lbs. @ $12 per lb. $36 Direct labor 5 hrs@ $15 perhr $75 Factory overhead: Variable $3 per direct labor hr $15 Fixed $4 per direct labor hr ($20 per unit)) $20 $146 During October, the company actually produced 7,800 widgets and the records showed the following: Direct materials purchased 23,100 bs @ $1260 Direct materials used 23,100 bs @ Direct labor 40,100 hours @ $14.60 Variable overhead $1 19,000 Fixed overhead $180,000 Note: The quantity purchased was exactly equal to the quantity used. REQUIRED: DIRECT MATERIALS 1. Compute the total variance (the flexible budget variance) for direct materials 2. Break that down into the price variance and the usage variance. 3. For each of the variances in #2, give ONE reason, or situation, which might account for the variance. 4. Verify that the flexible budget variance in 1) above reconciles with DIRECT LABOR 5. Compute the total variance (the flexible budget variance) for direct labor 6. Break that down into the rate variance and the efficiency variance. 7. For each of the variances in #2, give ONE reason, or situation, which might account for the variance. 8. Verify that the flexible budget variance in 1) above reconciles with NOTES

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