Question
The Brown Manufacturing Company's costing system has two direct-cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to
The Brown Manufacturing Company's costing system has two direct-cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct manufacturing labor-hours (DLH). At the beginning of 2019, Beal adopted the following standards for its manufacturing costs: Input Direct materials 2lb. at $5 per lb. 21.00 Direct manufacturing labor 7 hrs. at $16 per hr. 126.00 Manufacturing overhead: Variable $6 per DLH 42.00 Fixed $9 per DLH 56.00 Standard manufacturing cost per output unit 245.00 The denominator level for total manufacturing overhead per month in 2017 is 42,000 direct manufacturing labor-hours. Beals flexible budget for January 2017 was based on this denominator level. The records for January indicated the following: Direct materials purchased 46,000 lb. at $7.30 per lb. Direct materials used 23,700 lb. Direct manufacturing labor 60000 hrs. at $17.50 per hr. Total actual manufacturing overhead (variable and fixed) $800,000 Actual production 9,000 output units 1. Prepare a schedule of total standard manufacturing costs for the 9,000 output units in January 2019. 2. For the month of January 2019, compute the following variances, indicating whether each is favorable (F) or unfavorable (U): a. Direct materials price variance, based on purchases b. Direct materials efficiency variance c. Direct manufacturing labor price variance d. Direct manufacturing labor efficiency variance e. Total manufacturing overhead spending variance f. Variable manufacturing overhead efficiency variance g. Production-volume variance
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