Question
Part C: Variance Analysis for Decision Making Bronfenbrenner Co. uses a standard cost system for its single product in which variable overhead is applied on
Part C: Variance Analysis for Decision Making
Bronfenbrenner Co. uses a standard cost system for its single product in which variable overhead is applied on the basis of direct labor hours. The following information is given:
Standard costs per unit:
Raw materials (1.5 grams at $16 per gram) ............................
$24.00
Direct labor (0.75 hours at $8 per hour) ..................................
$6.00
Variable overhead (0.75 hours at $3 per hour) ........................
$2.25
Actual experience for current year:
Units produced ........................................................................
22,400 units
Purchases of raw materials (21,000 grams at $17 per gram) ..
$357,000
Raw materials used ..................................................................
33,400 grams
Direct labor (16,750 hours at $8 per hour) ..............................
$134,000
Variable overhead cost incurred ..............................................
$48,575
Required:
Compute the following variances for raw materials, direct labor, and variable overhead, assuming that the price variance for materials is recognized at point of purchase:
a.Direct materials price variance.
b.Direct materials quantity variance.
c.Direct labor rate variance.
d.Direct labor efficiency variance.
e.Variable overhead spending variance.
f.Variable overhead efficiency variance.
g.As a manager, why is variance analysis important?
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