Standard Cost

Question:

Examine the four direct costs variances from the in-class problem. Which one do you believe is the most important? Explain. Make recommendations to management about what to do, if anything, in response

to this variance.

( please help)

Songs on the Wind makes a variety of windchimes. Each piece is made from scrap metal repurposed from old cars, old cutlery or whatever else the firm can find at a reasonable price. The firm markets its products to gift shops in tourist areas, and at local craft shows. Special orders are also accepted. The most popular item consists of spirals of shining metal around a centre shaped like a crescent moon. The standard cost card follows: $16.25 DM (5 ounces of metal @ 3.25 per ounce) DL (.75 hour @ $25.00 per hour) 18.75 1.53 VOH (.65 MH @ $2.35 per MH 10.86 FOH (.65 MH @ $16.70 per MH) $47.39 Unit Cost The DM price standard is based on a negotiated price with suppliers that includes shipping of $.20 per ounce. It includes expectations of quality and a discount for buying in quantity. The DM quantity standard is based on the amount required to make one good unit. It includes an adjusted for accidents during the cutting process caused by unexpected weaknesses in the material. During March, 5,400 units were produced. 30,000 ounces of metal had been purchased at a total cost of $101,000. 24,200 ounces were used in production. The DL rate standard is based on the hourly rate paid to entry level employees who make this item which requires little in the way of special skills. Benefits are also included in the rate. The DL usage standard includes the amount of time required for an entry level employee to complete one good unit. There is an adjustment for accidents due to quality defects and a productivity adjustment at an acceptable level of 5%. During March, a total of 3,980 hours were worked on this product. Payroll associated with those hours (including benefits) was $99,900. 1. Compute the two DM variances. Label! 2. Compute the two DL variances. Label