Review of Chapters 7 and 8, 3-variance analysis. (CPA, adapted) The Brown Manufacturing Companys costing system has two direct-cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct manufacturing labor-hours (DLH). At the beginning of 2014, Beal adopted the following standards for its manufacturing costs:InputCost per Output UnitDirect materials5 lb. at $4 per lb.$ 20.00Direct manufacturing labor4 hrs. at $16 per hr. 64.00Manufacturing overhead: Variable$8 per DLH 32.00 Fixed$9 per DLH 36.00Standard manufacturing cost per output unit$152.00The denominator level for total manufacturing overhead per month in 2014 is 37,000 direct manufacturing labor-hours. Beals flexible budget for January 2014 was based on this denominator level. The records for January indicated the following:Direct materials purchased40,300 lb. at $3.80 per lb.Direct materials used37,300 lb.Direct manufacturing labor31,400 hrs. at $16.25 per hr.Total actual manufacturing overhead (variable and fixed)$650,000Actual production7,600 output units 1. Prepare a schedule of total standard manufacturing costs for the 7,600 output units in January 2014. 2. For the month of January 2014, 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. Total manufacturing overhead spending variance f. Variable manufacturing overhead efficiency variance g. Production-volume variance 326 CHAPTER 8 FLEXIBLE BUDGETS, OVERHEAD COST VARIANCES, AND MANAGEMENT CONTROL 8-41 Overhead variances, service sector. Cavio is a cloud service provider that offers computing resources to handle enterprise-wide applications. For March 2014, Cavio estimates that it will provide 18,000 RAM hours of services to clients. The budgeted variable overhead rate is $6 per RAM hour.At the end of March, there is a $500 favorable spending variance for variable overhead and a $1,575 unfavorable spending variance for fixed overhead. For the services actually provided during the month, 14,850 RAM hours are budgeted and 15,000 RAM hours are actually used. Total actual overhead costs are $119,875. 1. Compute efficiency and flexible-budget variances for Cavios variable overhead in March 2014. Will variable overhead be over- or underallocated? By how much? 2. Compute production-volume and flexible-budget variances for Cavios fixed overhead in March 2014. Will fixed overhead be over- or underallocated? By how much? 8-42 Direct-cost and overhead variances, income statement. The Kordell Company started business on January 1, 2013, in Raleigh. The company adopted a standard absorption costing system for its one producta football for use in collegiate intramural sports. Because of the extensive handcrafting needed to do quality assurance on the final product, Kordell chose direct labor as the application base for overhead and decided to use the proration method to account for variances at year-end.Kordell expected to make and sell 80,000 footballs the first year; each football was budgeted to use 1 pound of leather and require 15 minutes of direct labor work. The company expected to pay $1 for each pound of leather and compensate workers at an hourly wage of $16. Kordell has no variable overhead costs, but expected to spend $200,000 on fixed manufacturing overhead in 2013.In 2013, Kordell actually made 100,000 footballs and sold 80,000 of them for a total revenue of $1 million. The expenses incurred were as follows:Fixed manufacturing costs$300,000Leather costs (110,000 pounds bought and used)$121,000Direct labor costs (30,000 hours)$465,000 1. Compute the following variances for 2013, and indicate whether each is favorable (F) or unfavorable (U): a. Direct materials efficiency variance b. Direct materials price variance c. Direct labor efficiency variance d. Direct labor price variance e. Total manufacturing overhead spending variance f. Fixed overhead flexible budget variance g. Fixed overhead production-volume variance 2. Compute Kordell Companys gross margin for its first year of operation. 8-43 Overhead variances, ethics. Hartmann Company uses standard costing. The company has two manufacturing plants, one in Georgia and the other in Alabama. For the Georgia plant, Hartmann has budgeted annual output of 2,000,000 units. Standard labor-hours per unit are 0.50, and the variable overhead rate for the Georgia plant is $3.30 per direct labor-hour. Fixed overhead for the Georgia plant is budgeted at $2,400,000 for the year.For the Alabama plant, Hartmann has budgeted annual output of 2,100,000 units with standard labor-hours also 0.50 per unit. However, the variable overhead rate for the Alabama plant is $3.10 per hour, and the budgeted fixed overhead for the year is only $2,205,000.Firm management has always used variance analysis as a performance measure for the two plants and has compared the results of the two plants.Tom Saban has just been hired as a new controller for Hartmann. Tom is good friends with the Alabama plant manager and wants him to get a favorable review. Tom suggests allocating the firms budgeted com-mon fixed costs of $3,150,000 to the two plants, but on the basis of one-third to the Alabama plant and two-thirds to the Georgia plant. His explanation for this allocation base is that Georgia is a more expensive state than Alabama.At the end of the year, the Georgia plant reported the following actual results: output of 1,950,000 using 1,020,000 labor-hours in total, at a cost of $3,264,000 in variable overhead and $2,440,000 in fixed overhead. RequiredRequiredISBN 1-269-87704-6Cost Accounting: A Managerial Emphasis, Fifteenth Edition, by Charles T. Horngren, Srikant M. Datar, and Madhav V. Rajan. Published by Prentice Hall. Copyright 2015 by Pearson Education, Inc.