Problem 10A-10 Comprehensive Standard Cost Variances [LO10-1, LO10-2, LO10-3, LO10-4]

Wonderful! Not only did our salespeople do a good job in meeting the sales budget this year, but our production people did a good job in controlling costs as wel said Kim Clark, president of Martell Company. "Our $14,800 overall manufacturing cost variance is only 2% of the $1.536.000 standard cost of products made during the year. That's well within the 3% parameter set by management for acceptable variances. It looks like everyone will be in line for a bonus this year. The company produces and sells a single product. The standard cost card for the product follows Standard Cost Card-per Unit Direct materials, 3.50 feet at $2.80 per foot Direct labor, 2.8 direct labor-hours at $12 per direct labor-hour Variable overhead, 2.8 direct labor-hours at $2.00 per direct labor-hour Fixed overhead, 2.8 direct labor-hours at $6.00 per direct labor-hour $ 9.80 33.60 5.60 16.80 Standard cost per unit $65.80 The following additional information is available for the year just completed a. The company manufactured 20,000 units of product during the year b. A total of 67,000 feet of material was purchased during the year at a cost of $3.00 per foot. All of this material was used to manufacture the 20,000 units. There were no beginning or ending inventories for the year c. The company worked 58,000 direct labor-hours during the year at a direct labor cost of $11.80 per hour. d. Overhead is applied to products on the basis of standard direct labor-hours. Data relating to manufacturing overhead costs follow: Denominator activity level (direct labor-hours) Budgeted fixed overhead costs Actual variable overhead costs incurred Actual fixed overhead costs incurred 52,500 $ 315,000 $133,400 $ 312,000