Subject name: Accounting & Finance Decision-Making Mangers * Variances Type Practice Problems*** Please show all work and place your responses on the Excel worksheet with an indication of formulas on how you're calculating the problem. The problem below: Steel Dynamo Inc. produces precast metal bars for industrial use. The general manager of the plant has just reviewed the contribution format income statement for September. The statement is shown below:

The general manager was shocked to see the loss for the month, especially since sales were exactly as budgeted. He met with the accounting manager to obtain information from the standard cost system. He reviewed the following standard variable cost per metal bar.

During September, the plant produced 5,000 bars and incurred the following costs: a.Purchased 24,000 pounds of materials at a cost of $2.95 per pound. There were no raw materials in inventory at the beginning of the month. b.Used 20,800 pounds of materials in production (Finished goods and work-in-process inventories are insignificant and can be ignored.) c.Worked 3,500 direct labor-hours at a cost of $8.80 per hour. d.Incurred a total variable manufacturing overhead cost of $4,500 for the month. A total of 1,900 machine-hours was recorded. It is the company's policy to close all variances to cost of goods sold on a monthly basis. 1.Compute the following variances for September. a.Direct materials price and quantity variances b.Direct labor rate and efficiency variance. c.Variable overhead rate and efficiency variances. 2.Summarize the variances computed in question 1 by showing the net overall favorable or unfavorable variance for September. 3.Pick out the two most significant variances that you computed in question 1. Explain possible causes of these variances.

Actual Budgeted $ 2,50,000 $ 2,50,000 Sales (5,000 bars) Variable expenses: Variable cost of goods sold * Variable selling expenses Total variable expenses Contribution margin Fixed expenses: Manufacturing overhead Selling and administrative Total fixed expenses Net operating income (loss) 80,000 20,000 1,00,000 1,50,000 96,660 20,000 1,16,660 1,33,340 60,000 75,000 1,35,000 15,000 60,000 75,000 1,35,000 (1,660) $ $ *Contains direct materials, direct labor, and variable manufacturing overhead Standard Quantity or Standard Price Standard Hours or Rate Cost Direct materials Direct labor Variable manufacturing overhead Total standard variable cost *Based on machine-hours 4.0 pounds 0.6 hours 0.3 hours* $2.50 /pound $9.00 /hr $2.00 /hr $10.00 $5.40 $0.60 $16.00