Standard Costs, Flexible Budgets and Variances Garcia Company produces hockey helmets. The standard cost for each helmet is as follows: Manufacturing Cost Direct Materials Direct Labor Variable Overhead (based on DL) Standard Quantity Standard Price/Rate Total Unit Cost 5 pounds/unit 2 hours/unit 2 hours/unit Fixed Overhead ($13,200/2,200 units) Total Standard Cost/Unit During November, actual results are as follows: Number of belmets produced and sold Number of pounds of material used Cost of materials used (Actual Price was $4.20 pound) Number of labor hours worked Direct labor cost (Actual Rate was $15.80/hour) Variable overhead cost (Actual Rate was $2.40/hour) Fixed overhead cost $4.00/lb. $16.00/hour $20.00 $32.00 $2.00/hour $ 4.00 $ 6.00 $62.00 2,400 12,600 $ 52,920 4,670 $ 73,786 $ 11,208 $12,000 Fill in the table below: Manufacturing Cost Actual Costs Spending Indicate (2,400 units) Variance For U Direct Materials 52,920 4920 U Flexible Budget (2,400 units) (2,200 units) 48,000 $44,000 Master Budget Direct Labor 73,786 (3014) F 76,800 70,400 Variable OH 11,208 1608 U 9. Goo 8,800 Fixed Overhead 12900 (300) F 13,200 13.200 Total costs 150,814 3214 U 147,600 $136,400 Variable cost Variances (use the formulas provided)- many amounts already calculated/given so you just need to determine the standard quantity for most of these. Quantity Variance-SP x (SQ-AQ) Price/Rate Variance-AQx (SP-AP) 1) Calculate the direct materials price, quantity and total spending variances for Garcia. 2) Calculate the direct labor rate, efficiency and total spending variances for Garcia. 3) Calculate the variable overhead rate, efficiency and total spending variances for Garcia. Fixed Cost Variances Remember: FOH volume variance Budgeted rate x (actual vs budgeted production volume) 4) Calculate the fixed overhead spending and volume variances for Garcia. Show work and record all answers on the following page Version 1-4 Direct Materials: Price Variance Quantity Variance Total Spending Variance: Direct Labor: Rate (Price) Variance: Quantity (Efficiency) Variance: Total Spending Variance: Variable Overhead: Rate (Price) Variance: Quantity (Efficiency) Variance: Total Spending Variance: Fixed Overhead: Spending Variance: Fixed Overhead Volume Variance: BONUS 1: By how much is fixed overhead over- or underapplied? (provide amount and state whether it is over- or underapplied) BONUS 2: Give an example of a favorable variance that might be indicative of a poor management decision