Manufacturing Cost Variances Problem
Barry’s Boxes manufactures a product with the following standard costs:
Cardboard #1 (0.5 yards @ $0.50 per yard) $ 0.25
Cardboard #2 (3 yards @ $0.80 per yard) 2.40
Cardboard #3 (0.4 yards @ $0.25 per yard) 0.10
Direct labor (0.25 hours @ $12 per hour) 3.00
Factory overhead (0.25 hours @ $22 per hour.
Factory overhead is 2/5 variable
and 3/5 fixed.) 5.50
Total standard cost per unit of output $11.25
Standards are based on normal monthly production of 82,000 units. During the month of
October the following occurred:
Cardboard #1 purchased (41,500 yards @ $0.52 per yard) $ 21,580
Cardboard #2 purchased (261,200 yards @ $0.87 per yard) 227,244
Cardboard #3 purchased (32,800 yards @ $0.29 per yard) 9,512
Cardboard #1 used (40,300 yards)
Cardboard #2 used (276,900 yards)
Cardboard #3 used (34,400 yards)
Direct labor (22,120 hours @ $11.50 per hour) 254,380
Actual variable factory overhead 196,000
Actual fixed factory overhead 295,000
Units produced during October 84,875
Required:
Prepare a variance report including calculations for all material, labor, and overhead
variances and appropriate JEs. Your report should include an analysis of and
recommendations on the variances incurred during October.