Question
OpulenceOpulence Clothing is a manufacturer of designer suits. For June 2014, each suit is budgeted to take 55 labor-hours. The budgeted number of suits to
OpulenceOpulence Clothing is a manufacturer of designer suits. For June 2014, each suit is budgeted to take 55 labor-hours. The budgeted number of suits to be manufactured in June 2014 is 1,060. Opulence Clothing allocates fixed manufacturing overhead to each suit using budgeted direct manufacturing labor-hours per suit. Data pertaining to fixed manufacturing overhead costs for June 2014 are budgeted, $84,800, and actual, $63,935. In June 2014 there were 1,120 suits started and completed. There were no beginning or ending inventories of suits.
Requirements
1. Compute the spending variance for fixed manufacturing overhead. Comment on the results.
2. Compute the production-volume variance for June 2014. What inferences can Opulence Clothing draw from this variance?
Requirement 1. Compute the spending variance for fixed manufacturing overhead. Comment on the results.
Begin by computing the following amounts for the fixed manufacturing overhead.
Now compute the spending variance. Label the variance as favorable (F) or unfavorable (U)
Spending variance Comment on the results.
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