Murr, Inc. produced 1,000 units of the company's product in 2018. The standard quantity of direct materials was three yards of fabric per unit at a standard cost of $1.35 per yard. Accounting records showed that 2,500 yards of cloth were used and the company paid $1.40 per yard. Standard time was two direct labor hours per unit at a standard rate of $10.00 per direct labor hour. Employees worked 1,700 hours and were paid $9.50 per hour

Mills Inc. is a competitor of Murry, Inc. from exercise E23-18. Mills also uses a standard cost system and provides the below information.

Static Budget Variable Overhead	$1,200
Static Budget Fixed Overhead	$1,600
Static budget for direct labor hours	800 hours
Static budget number of units	400 units
Standard Direct Labor Hours	2 hours per unit

Find out and analyze: The requirements

1. Calculate variable overhead and efficiency variances and fixed overhead and volume variances.

2. EXPLAIN (as best you can) why the variations are favorable or unfavorable. Based on cost and efficiency budget standards.

Solutions should look like this:

standard VOH	= budgeted VOH
allocation rate	Budgeted Allocation Basis
	=(answer)
	(answer)
	(answer)

standard FOH	= budgeted FOH
allocation rate	Budgeted Allocation Basis
	= (answer)
	(answer)
	= (answer)

VOH Cost Variance

VOH Cost Variance	= Actual VOH - (SC * AQ)
	(answer)
	(answer)

VOH Efficiency Variation

VOH Efficiency Variation	= (AQ-SQ) * SC
	(answer)
	(answer)

FOH cost variance

FOH cost variance	=Actual FOH-Budgeted FOH
	(answer)
	(answer)

FOH volume variation

FOH volume variation	= Budgeted FOH - Assigned FOH
	(answer)
	(answer)

a&b

(a) 1000 units * 2 DLHr per unit = 2000 DLHr
(b) $2 per DLHr * 2,000 DLHr = $4,000

REQUIREMENT 2

The unfavorable variable overhead cost variance of $1,600 indicates that
(answer)
(answer)
(answer)
The favorable variable overhead efficiency variance of $600 indicates that
(answer)
(answer)
(answer)
The unfavorable fixed overhead variance of $1,500 indicates that
(answer)
(answer)
$2,400 favorable fixed overhead volume variance is not a cost variance
(answer)
(answer)
(answer)
(answer)
(to)