Problem 2:

Greener pastures Inc. produces a number of products including handmade large fiberglass planters for outdoor displays. The firm which began operations at the beginning of the current year uses a standard cost system. Each planter requires 3 pounds of material at $6 per pound and two hours of direct labor at $12 per direct labor hour. Variable overhead is allocated on the basis of direct labor hours at $9 per direct labor hour fixed overhead based on total budgeted. Fixed overhead cost of $15,000 per month and an estimated monthly volume of 3,000 units. For November the company produced and sold 3,100 units of the following costs below there were no changes in any inventory account during the month.

Direct Materials (10,000 lbs)

$55,000

Direct Labor (6,500 hrs)

84,500

Variable Overhead

54,000

Fixed Overhead

16,500

Total Production Costs incurred

$210,000

In the next two questions compute the variances and label them as Favorable (F) or Unfavorables (U). SHOW WORK

Compute the Direct Material price variances

$800 F

$5,000 F

$9,200 U

$700 U

2. Compute the Direct Material usage variance

$4,200 U

$5,000 U

$800 U

$700 F