Headset manufactures headphone cases. During September 2018, the company produced and sold 106,000 cases and recorded the following cost data: E: (Click the icon to view the cost data.) Read the requirements 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 Choose from any list or enter any number in the input fields and then click Check Answer. 1 parts 4 remaining Clear All Check Answer Standard Cost Information Cost Quantity 2 parts Direct Materials $0.16 per part per 0.02 hours Direct Labor Variable Manufacturing Overhead 7.00 hour per 11.00 hour 0.02 hours Fixed Manufacturing Overhead ($28,800 for static budget volume of 96,000 units and 1,920 hours, or $15 per hour) Actual Cost Information (207,000 parts @ Direct Materials Direct Labor $0.21 per part) $7.10 per hour) $43,470 11,502 (1,620 hours @ Variable Manufacturing Overhead Fixed Manufacturing Overhead 12,000 25,000 1. 2. Compute the cost and efficiency variances for direct materials and direct labor. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances Headset's management used better quality materials during September. Discuss the trade-off between the two direct material variances 3. Requirement 2. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances. We are told in the problem that the actual variable overhead (VOH) amounted to To determine the VOH cost variance, then, we can subtract the "SC X AQ" from the actual VOH. Once again, before we go ahead and make the cost and efficiency computations for VOH, let's identify the amounts needed to complete those calculations. We're given the actual quantity at actual cost and the standard cost per hour Note that variable overhead is applied based on direct labor hours. The actual quantity (AQ) and standard quantity (SQ) amounts, then, are the same as those we determined when accumulating the information for direct labor. These amounts have been entered into the table for you. Variable Overhead Actual quantity at Actual cost [Actual VOH] Standard cost (SC) per hr. Actual quantity (AQ) hours Standard quantity (SQ) hours Compute the variable overhead cost and efficiency variances using the amounts we have previously determined and identify whether each variance is favorable (F) or unfavorable (U). The variance is favorable when actual amounts are less than standards and unfavorable when actual amounts exceed standards
