Question 1. Meechai is a cost accountant and business analyst for Orapim Boyd Company

(OBC), which manufactures expensive gold rings. OBC uses two direct cost categories: direct

materials and direct manufacturing labor. Meechai feels that manufacturing overhead is most

closely related to material usage. Therefore, OBC allocates manufacturing overhead to

production based upon pounds of materials used.

At the beginning of 2017, OBC budgeted annual production of 410,000 rings and adopted

the following standards for each ring:

Input Cost/Ring

Direct materials (gold) 0.3 lb. @$9/lb. $ 2.70

Direct manufacturing labor 1.2 hours @$16/hour 19.20

Manufacturing overhead:

Variable $4/lb. 0.3 lb. 1.20

Fixed $14/lb. 0.3 lb. 4.20

Standard cost per ring $27.30

Actual results for January 2019 were as follows:

Production 32,000 rings

Direct materials purchased 12,900 lb. at $10/lb.

Direct materials used 9,000 lbs.

Direct manufacturing labor 29,600 hours for $621,600

Variable manufacturing overhead $ 64,900

Fixed manufacturing overhead $160,000

Required:

1. For the month of April, compute the following variances, indicating whether each is

favorable (F) or unfavorable (U):

a. Direct materials price variance (based on purchases)

b. Direct materials efficiency variance

c. Direct manufacturing labor price variance

d. Direct manufacturing labor efficiency variance

e. Variable manufacturing overhead spending variance

f. Variable manufacturing overhead efficiency variance

g. Production-volume variance

h. Fixed manufacturing overhead spending variance