Question
The following standard costs were developed for Product A at Larry Corporation. Budgeted production for the year is 10,000 units, and overhead is applied on
The following standard costs were developed for Product A at Larry Corporation. Budgeted production for the year is 10,000 units, and overhead is applied on the basis of direct labor hours.
The master budget is as follows:
Direct materials(40,000 feet $14.00 per foot)$560,000Direct labor (DL)(60,000 DL hours $10.00 per hour)$600,000Variable overhead(60,000 DL hours $8.00 per hour)$480,000Fixed overhead$720,000Total budgeted cost$2,360,000
The following actual information is available for the production of Product A for the period:
Units produced:9,500Materials purchased:39,500 feet @ $13.80 per footMaterials used:39,500 feetDirect labor:56,000 hours, costing $560,000Variable overhead incurred:$470,000Fixed overhead incurred:$720,000
Required:
- Calculate the dollar amount and label the following variances as "favorable" or "unfavorable":
- Direct materials price variance
- Direct materials efficiency variance
- Direct labor efficiency variance
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