Problem: 1

Vernon Mills, Inc. is a large producer of men's and women's clothing. The company uses standard costs for all of its products. The standard costs and actual costs per unit of product for a recent period are given below for one of the company's product lines:

Standard Cost

Actual Cost

Standard: 4.0 metres at $5.40 per metre

$21.60

Actual: 4.4 metres at $5.05 per metre

$22.22

Direct Labour:

Standard: 1.6 hours at $6.75 per hour

$10.80

Actual: 1.4 hours at $7.30 per hour

$10.22

Variable Overhead:

Standard: 1.6 hours at $2.70 per hour

$4.32

Actual: 1.4 hours at $3.25 per hour

______

_$4.55

Total Cost per Unit

$36.72

$36.99

During this period, the company produced 4,800 units of this product. A comparison of standard and actual costs for the period on a total cost basis is given below:

Actual Costs: 4,800 units at $36.99

$177,552

Standard Costs: 4,800 units at $36.72

$176,256

Difference in Cost-Unfavourable

$1,296

There was no inventory of materials on hand at the beginning of the period. During the period, 21,120 metres of materials were purchased, all of which were used in production.

Required:

a) For direct materials, compute the price and quantity variances for the period

b) For direct labour, compute the rate and efficiency variances

c) For variable overhead, compute the spending and efficiency variances.

Problem: 2

The following is the standard cost card for X Company's only product:

Direct materials, 4 metres at $4.00

$16.00

Direct labour, 5 hours at $10.00

$15.00

Variable overhead, 1.5 hours at $3.00

$4.50

Fixed overhead, 1.5 hours at $7.00

$10.50

Standard cost per unit

$46.00

The company manufactured and sold 18,000 units of product during the year. A total of 70,200 metres of material was purchased during the year at cost of $4.20 per metre. All of this material was used to manufacture the 18,000 units. The company records showed no beginning or ending inventories for the year.

The company worked 29,250 direct labour hours during the year at a cost of $9.75 per hour. Overhead cost is applied to products on the basis of direct labour hours. The denominator activity level (direct labour hours) was 22,500 hours. Budgeted fixed overhead costs as shown on the flexible budget were $157,500, while actual fixed overhead costs were $156,000. Actual variable overhead costs were $90,000.

Required:

a) Compute the direct materials price and quantity variances for the year.

b) Compute the direct labour rate and efficiency variances for the year.

c) Compute the variable overhead spending and efficiency variances for the year.

d) Compute the fixed overhead budget and volume variances for the year.