Question
Stratton, Ltd. manufactures shirts, which it sells to customers for embroidering with various slogans and emblems. The standard cost card for the shirts is as
Stratton, 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 $3per yard 2.00yards $6.00
Direct labor $14per DLH 0.75DLH 10.50
Variable overhead $3.20per DLH 0.75DLH 2.40
Fixed overhead $3per DLH 0.75DLH 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 purchased82,000yards of fabric and used93,700yards of fabric during the month. Fabric purchases during the month were made at $2.80per yard. The direct labor payroll ran $457,375, with an actual hourly rate of $12.50per direct labor hour. The annual budgets were based on the production of600,000shirts, using450,000direct labor hours. Though the budget for November was based on45,000shirts, the company actually produced42,500shirts during the month.
Variable Overhead Budget
Annual Budget Per Shirt NovemberActual
Indirect material $720,000 $1.20 $52,900
Indirect labor 450,000 0.75 31,400
Equipment repair 180,000 0.30 13,700
Equipment power 90,000 0.15 6,500
Total $1,440,000 $2.40 $104,500
Fixed Overhead Budget
Annual Budget NovemberActual
Supervisory salaries $430,000 $37,200
Insurance 140,000 11,500
Property taxes 60,000 5,000
Depreciation 245,000 21,300
Utilities 225,000 18,000
Quality inspection 250,000 22,400
Total $1,350,000 $115,400
(a)Calculate the direct materials price and quantity variances for November.(If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
Direct material price variance$
Select an option Favorable Unfavorable Not Applicable
Direct material quantity variance$
Select an option Favorable Unfavorable Not Applicable
(b)Calculate the direct labor rate and efficiency variances for November.(Round answers to 0 decimal places, e.g. 125. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
Direct labor rate variance$
Select an option Unfavorable Favorable Not Applicable
Direct labor efficiency variance$
Select an option Not Applicable Unfavorable Favorable
(c)Calculate the variable overhead spending and efficiency variances for November.(Round answers to 0 decimal places, e.g. 125. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
Variable overhead spending variance$
Select an option Unfavorable Favorable Not Applicable
Variable overhead efficiency variance$
Select an option Favorable Unfavorable Not Applicable
(d)Calculate the fixed overhead spending variance for November.(Round answer to 0 decimal places, e.g. 125. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
Fixed overhead spending variance$
enter the fixed overhead spending variance in dollars
select an option Unfavorable Favorable Not Applicable
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