Headset manufactures headphone cases. During September 2018, the company produced and sold 105,000 cases and recorded the following cost data:

Standard Cost Information
	Quantity		Cost
Direct Materials	2	parts	$0.15	per part
Direct Labor	0.02	hours	9.00	per hour
Variable Manufacturing Overhead	0.02	hours	11.00	per hour
Fixed Manufacturing Overhead ($28,500 for static budget volume
of 95,000 units and 1,900 hours, or $15 per hour)

Actual Cost Information
Direct Materials	(207,000 parts @		$0.20	per part)	$41,400
Direct Labor	(1,600 hours @		$9.15	per hour)	14,640
Variable Manufacturing Overhead					12,000
Fixed Manufacturing Overhead					25,000

Requirement 1. Compute the cost and efficiency variances for direct materials and direct labor.

Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity.)

		Formula		Variance
Direct materials cost variance	=		=
Direct labor cost variance	=		=

Next compute the efficiency variances. Select the required formulas, compute the efficiency variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standardquantity.)

		Formula		Variance
Direct materials efficiency variance	=		=
Direct labor efficiency variance	=		=

Requirement 2. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances.

Now compute the variable overhead cost and efficiency variances. Select the required formulas, compute the variable overhead cost and efficiency variances, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standardcost; SQ = standard quantity; VOH = variable overhead.)

		Formula		Variance
VOH cost variance	=		=
VOH efficiency variance	=		=

Now compute the fixed overhead cost and volume variances. Select the required formulas, compute the fixed overhead cost and volume variances, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ= standard quantity.)

		Formula		Variance
FOH cost variance	=		=
FOH volume variance	=		=

Requirement 3.

HeadsetHeadset's

management used better quality materials during September. Discuss the trade-off between the two direct material variances.

HeadsetHeadset's

management knew that using higher quality materials would result in a(n)

favorable direct material cost variance

favorable direct material efficiency variance

unfavorable direct material cost variance

unfavorable direct material efficiency variance

. They hoped these materials would result in more efficient usage than "standard" materials. The result was an overall

favorable direct material cost variance

favorable direct material flexible budget variance

unfavorable direct labor flexible budget variance

unfavorable direct material flexible budget variance

.

AND also,

Premium,Inc. produced 1,000units of the company's product in 2018. The standard quantity of direct materials was three yards of cloth per unit at a standard cost of $ 1.40 per yard. The accounting records showed that 2,900 yards of cloth were used and the company paid $1.45 per yard. Standard time was two direct labor hours per unit at a standard rate of $10.75 per direct labor hour. Employees worked 1,800 hours and were paid $10.25 per hour.

Requirement 1. What are the benefits of setting cost standards?

Standard costing helps managers do the following:

Requirement 2. Calculate the direct materials cost variance and the direct materials efficiency variance as well as the direct labor cost and efficiency variances.

Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity.)

		Formula		Variance
Direct materials cost variance	=		=
Direct labor cost variance	=		=

Select the required formulas, compute the efficiency variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable(U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity.)

		Formula		Variance
Direct materials efficiency variance	=		=
Direct labor efficiency variance	=		=