Question
Swifty, Ltd. manufactures shirts, which it sells to customers for embroidering with various slogans and emblems. The standard cost card for the shirts is as
Swifty, 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 | $4 per yard | 1.50 | yards | $6.00 | ||||
Direct labor | $12 per DLH | 0.50 | DLH | 6.00 | ||||
Variable overhead | $4 per DLH | 0.50 | DLH | 2.00 | ||||
Fixed overhead | $6 per DLH | 0.50 | DLH | 3.00 | ||||
$17.00
|
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 purchased and used 80,000 yards of fabric during the month. Fabric purchases during the month were made at $3.90 per yard. The direct labor payroll ran $316,050, with an actual hourly rate of $12.25 per direct labor hour. The annual budgets were based on the production of 52,000 shirts, using 255,000 direct labor hours. Though the budget for November was based on 49,200 shirts, the company actually produced 51,200 shirts during the month.
Variable Overhead Budget | |||||||
|
| Annual Budget |
| Per Shirt |
| NovemberActual |
|
Indirect material |
| $450,000 |
| $0.90 |
| $49,600 |
|
Indirect labor |
| 302,000 |
| 0.60 |
| 31,900 |
|
Equipment repair |
| 195,000 |
| 0.40 |
| 20,300 |
|
Equipment power |
| 50,000 |
| 0.10 |
| 7,400 |
|
Total |
| $997,000 |
| $2.00 |
| $109,200 |
|
Fixed Overhead Budget | ||||||||||
|
| Annual Budget |
| NovemberActual |
| |||||
Supervisory salaries |
| $262,000 |
| $21,500 |
| |||||
Insurance |
| 350,000 |
| 27,300 |
| |||||
Property taxes |
| 80,000 |
| 7,000 |
| |||||
Depreciation |
| 321,000 |
| 25,900 |
| |||||
Utilities |
| 210,000 |
| 20,500 |
| |||||
Quality inspection |
| 277,000 |
| 25,000 |
| |||||
Total |
| $1,500,000 |
| $127,200 |
|
(a) Calculate the direct materials price and quantity variances for November. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.) (include favorable or unfavorable).
(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.) (include favorable or unfavorable).
(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.) (include favorable or unfavorable).
(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.) (include favorable or unfavorable).
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