I need to know how to calculate the Direct materials and labor cost and efficiency variances

E23-16 Preparing a flexible budget performance report Stenback Pro Company managers received the following incomplete performance report: STENBACK PRO COMPANY Flexible Budget Performance Report For the Year Ended July 31, 2014 Units Flexible Budget Flexible Actual Results Variance Budget Sales Volume Static Variance Budget Units Sales Revenue Variable Expenses Contribution Margin Fixed Expenses 39,000 (a) 218,000 (b) 84,000 (c) 134,000 (d) 108,000 ( e) 39,000 3,000 F (g) 218,000 27,000 F (h) 81,000 10,000 U (i) 137,000 17,000 F 0 (j) 101,000 (k) Operating Income 26,000 (f) 36,000 17,000 F (l) Complete the performance report. Identify the employee group that may deserve praise and the group that may be subject to criticism. Give your reasoning. Sales Revenue Variable Costs: Manufacturing: Direct Materials Direct Labor Variable Overhead Variable Overhead Selling & Administrative: Supplies: Total Variable Costs Contribution Margin Fixed Costs: Manufacturing Selling & Administrative: Total Fixed Costs Operating Income Stenback Pro Company Flexible Budget Performance Report For the Year ended July 31, 2014 1 2 3 4 5 Flexible Sales Budgets Amounts Actual Budget Flexible Volume Static per Unit Results Variance Budget Variance Budget 39,000 0 39,000 3,000F 36,000 $5.59 218,000 0 218,000 27,000 F 191,000 84,000 3,000 U 134,000 3,000 U 81,000 10,000 U 137,000 17,000 F 71,000 120,000 108,000 7,000 U 26,000 10000 U 101,000 0 36,000 17,000 F 101,000 19,000 The Sales Revenue deserves praise for a favorable sales volume variance. The total variable costs were unfavorable so the manager may need to take a look at the quality of products being ordered. E23-19 Calculating materials and labor variances Great Fender, which uses a standard cost accounting system, manufactured 20,000 boat fenders during 2014, using 144,000 square feet of extruded vinyl purchased at $1.05 per square foot. Production required 420 direct labor hours that cost $13.50 per hour. The direct materials standard was 7 square feet of vinyl per fender, at a standard cost of $1.10 per square foot. The labor standard was 0.025 direct labor hour per fender, at a standard cost of $12.50 per hour. Compute the cost and efficiency variances for direct materials and direct labor. Does the pattern of variances suggest Great Fender's managers have been making trade-offs? Explain Direct Materials Cost Variance = (AC SC) AQ ($1.05 sq. ft. - $1.10 sq. ft.) X 144,000 = $7,200 F sq. ft. Direct Materials Efficiency Variance = (AQ SQ) SC (144,000 sq. ft. - 140,000 sq. ft.) X 1.10 sq. ft. = $4,400 U Direct Labor Cost Variance = (AC SC) AQ ($5,670 - $6,250) X $13.50 DLHr = $7,830 F Direct Labor Efficiency Variance = (AQ SQ) SC (420 - 500) X $12.50 = $1,000 F DL Eff. Var. $1,000 F I don't believe the managers have been making trade-offs because the production costs and labor was higher than the standard. Note: Exercise E23-19 should be completed before attempting Exercise E23-20. E23-20 Computing overhead variances Review the data from Great Fender given in Exercise E23-19. Consider the following additional information: Static budget variable overhead $ 5,500 Static budget fixed overhead $ 22,000 Static budget direct labor hours 550 hours Static budget number of units 22,000 units Great Fender allocates manufacturing overhead to production based on standard direct labor hours. Great Fender reported the following actual results for 2014: actual variable overhead, $4,950; actual fixed overhead, $23,000. Requirements 1. Compute the overhead variances for the year: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance. 1. FOH Vol. Var. $2,000 U Great Fender Static Budget Performance Report For the Year Ended 2014 Actual Static Results Budget Variance 22,000 Units (Batches of Sales Revenue Manufacturing: Direct Materials Direct Labor Variable Overhead Selling and Administrative: Supplies Total Variable Costs Contribution Margin Fixed Costs: Manufacturing Selling and Administrative Total Fixed Costs Operating Income 4,950 P23-36 Calculating materials and labor variances and preparing journal entries This continues the Davis Consulting, Inc. situation from Problem P22-26 of Chapter 22. Assume Davis has created a standard cost card for each job. Standard direct materials include 14 software packages at a cost os $900 per package. Standard direct labor costs per job include 90 hours at $120 per hour. Davis plans on completing 12 jobs during March 2013. Actual direct materials costs for March include 90 software packages at a total cost of $81,450. Actual direct costs included 100 hours per job at an average rate of $125 per hour. Davis completed all 12 jobs in March. Requirements 1. Calculate direct materials cost and efficiency variances. 2. Calculate direct labor cost and efficiency variances. 3. Prepare journal entries to record the use of both materials and labor for March for the company. Direct materials cost variance = (Actual Cost - Standard Cost) X Actual Quantity ($81,450 - $12,600) X 90 $68,850 X 90 = $6,196,500 U Direct labor cost variance = (Actual Cost - Standard Cost) X Actual Quantity ($12,500 - $$10,800) = Date Trans. 1 Trans. 2 Trans. 3 Accounts and Explanation Debit Credit Raw Materials Inventory (65,000 pounds $1.75/pound) 113,750 Direct Materials Cost Variance 9,750 Accounts Payable (65,000 pounds $1.60/pound) 104,000 Purchased direct materials. Work-in-Process Inventory (1 lb./batch $1.75/lb. 52,000 batches) Direct Materials Efficiency Variance Raw Materials Inventory (65,000 pounds $1.75/pound) Used direct materials. Work-in-Process Inventory (0.25 DLHr/batch $12/DLHr 52,000 batches)