Question
PROBLEM 11-9. Comprehensive Variance Problem [LO 2,3,4] Bowser Products operates a small plant in New Mexico that produces dog food in batches of 1,500 pounds.The
PROBLEM 11-9. Comprehensive Variance Problem [LO 2,3,4] Bowser Products operates a small plant in New Mexico that produces dog food in batches of 1,500 pounds.The product sells for $6 per pound.Standard costs for 2015 are:
Standard direct labor cost $15 per hour
Standard direct labor hours per batch 10 hours
Standard price of material A $0.35 per pound
Standard pounds of material A per batch 800 pounds
Standard price of material B $0.55 per pound
Standard pounds of material B per batch 250 pounds
Fixed overhead cost per batch $500
At the start of 2015,the company estimated monthly production and sales of 50 batches. The company estimated that all overhead costs were xed and amounted to $25,000 per month. During the month of June 2015 (typically a somewhat slow month),42 batches were produced (not an unusual level of production for June).The following costs were incurred:
Direct labor costs were $7,800 for 460 hours.
37,500 pounds of material A costing $8,500 were purchased and used.
12,000 pounds of material B costing $5,600 were purchased and used.
Fixed overhead of $23,000 was incurred.
Required
a. Calculate variances for material,labor,and overhead.
b. Prepare a summary of the variances.Does the unfavorable overhead volume variance suggest that overhead costs are out of control?
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