Question
Sheffield, Ltd. manufactures shirts, which it sells to customers for embroidering with various slogans and emblems. The standard cost card for the shirts is as
Sheffield, Ltd. manufactures shirts, which it sells to customers for embroidering with various slogans and emblems. The standard cost card for the shirts is as follows. Standard Price Standard Quantity Standard Cost Direct materials $3 per yard 2.00 yards $6.00 Direct labor $14 per DLH 0.75 DLH 10.50 Variable overhead $3.20 per DLH 0.75 DLH 2.40 Fixed overhead $3 per DLH 0.75 DLH 2.25 $21.15 Sandy Robison, operations manager, was reviewing the results for November when he became upset by the unfavorable variances he was seeing. In an attempt to understand what had happened, Sandy asked CFO Suzy Summers for more information. She provided the following overhead budgets, along with the actual results for November. The company purchased 82,800 yards of fabric and used 94,400 yards of fabric during the month. Fabric purchases during the month were made at $2.80 per yard. The direct labor payroll ran $469,175, with an actual hourly rate of $12.25 per direct labor hour. The annual budgets were based on the production of 608,000 shirts, using 458,000 direct labor hours. Though the budget for November was based on 46,300 shirts, the company actually produced 42,800 shirts during the month.
Variable Overhead Budget Annual Budget Per Shirt NovemberActual Indirect material $446,000 $1.20 $48,700 Indirect labor 304,000 0.75 31,100 Equipment repair 195,000 0.30 20,800 Equipment power 54,000 0.15 7,500 Total $999,000 $2.40 $108,100 Fixed Overhead Budget Annual Budget NovemberActual Supervisory salaries $259,000 $21,400 Insurance 345,000 27,800 Property taxes 84,000 8,600 Depreciation 321,000 25,500 Utilities 213,000 20,000 Quality inspection 281,000 25,300 Total $1,503,000 $126,800 ) Actual Production = 52,000 shirts Direct Material price variance = Direct Material quantity variance c) Variable Overhead Spending Variance = Variable Overhead Efficiency Variance d) Fixed Overhead Spending variance b) Direct labor rate variance = Direct labor efficiency variance =
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