Soundset manufactures headphone cases. During September 2016, the company produced and sold 108,000

cases and recorded the following cost data:

Standard Cost Information

Quantity

Cost

Direct Materials

2

parts

$0.17

per part

Direct Labor

0.02

hours

7.00

per hour

Variable Manufacturing Overhead

0.02

hours

9.00

per hour

Fixed Manufacturing Overhead ($33,320 for static budget volume

of 98,000 units and 1,960 hours, or $17 per hour)

Actual Cost Information

Direct Materials

(213,000 parts @

$0.22

per part)

$46,860

Direct Labor

(1,660 hours @

$7.10

per hour)

11,786

Variable Manufacturing Overhead

9,000

Fixed Manufacturing Overhead

33,000

1.

Compute the cost and efficiency variances for direct materials and direct labor.

2.

For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances.

3.

Soundset management used better quality materials during September. Discuss the trade-off between the two direct material variances.