HeadsetHeadset

manufactures headphone cases. During September

20182018,

the company produced and sold

108 comma 000108,000

cases and recorded the following cost data:

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(Click the icon to view the cost data.)Read the requirements

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.

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	=		=	10,000	U
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 = standard quantity.)

		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 = standard cost; 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

.

Data Table Aphd hed Standard Cost Information Quantity Cost hed Direct Materials $ 2 parts 0.02 hours es. Direct Labor 0.15 per part 7.00 per hour 10.00 per hour Variable Manufacturing Overhead 0.02 hours Fixed Manufacturing Overhead ($31,360 for static budget volume of 98,000 units and 1,960 hours, or $16 per hour) var unfa Actual Cost Information Direct Materials (212,000 parts @ (1,660 hours @ $ $ 0.20 per part) 7.15 per hour) $ 42,400 11,869 Direct Labor Warid 8,000 nce Variable Manufacturing Overhead Fixed Manufacturing Overhead 28,000 mter Print Done