The Larsen Sporting Goods Company uses a standard cost system for producing 10-pound steel dumbbells. The standard cost for steel is $.60 per pound, and each dumbbell should require 3 standard direct labor hours at a standard rate of $4.50 per hour. The standard variable overhead rate is $2.30 per direct labor hour, and normal capacity was set at a monthly level of 19,000 hours of direct labor. Fixed overhead cost of $3,800 was budgeted for March. During the month of March, 65,000 dumbbells were actually produced, using 657,000 pounds of steel. During the period, 657,000 pounds of steel were also purchased, and the cost of the steel was 381,060. Direct labor hours numbered 22,100 at an expense of $100,555. Total overhead expenses came to $57,000. Using the data above, compute the following variances for the month of March. Indicate whether each variance is favorable or unfavorable by writing F or U after each a. Direct materials price variance $131D b. Direct materials quantity variance $ $1oc c. Direct labor rate variance-s1105 d. Direct labor efficiency variance si Controllable overhead variance- s f. Overhead volume variance . Using the data provided in exercise 3 above, break the controllable overhead variance down into the overhead , spending variance and the overhead efficiency variance. a. Overhead spending variance $ b. Overhead efficiency variance-$ DECISION MAKING ANALYSIS Cl. During 19X1, Kadok Company produced, among other products, 6,000 cameras, incurring the following unit costs: $8 in direct materials, $6 in direct labor, $3 in variable overhead, $5 in fixed overhead, $2 in variable selling and administrative expenses, and $4 in fixed selling and administrative expenses. Kadok could have had an outsider produce the cameras for $20 each. Assuming that the factory space could have otherwise been rented out for $10,000 during 19X1, acceptance of the outside offer would have lost the company $8,000. a. b. lost the company $38,000. c. saved the company $4,000 d. saved the company $58,000 26 EXERCISE 23 III. Overbead Variances A. TWO-WAY VARIANCES Actual Overhead Cost Incurred $4,100 Less: Budgeted Factory Overhead (flexible budget) for 180 chairs: (180 chairs X2.4 hour/chair) 2,484 1.300 Budgeted Fixed overhead cost Total Budgeted Factory Overhead Controllable Overhead Variance 316 (U) 2. OR Split Controllable Overhead Variance ABOVE into: a. Overhead Spending Variance Actual Overhead Cost Incurred 4,100 Less: budgeted factory overhead (flexible budget) for 450 hours worked: Variable Overbead Costs: 2,587.50 Budgeted Fixed Overhead Cost 1.300.00 450 hrs x $5.75 per direct labor hour 3.887.50 212.50 Total Budgeted Factory Overhead Overhead Spending Variance (U) (212.50 unfavorable) b. Overhead Efficiency Variance Budgeted Factory Overhead (from above) 3,887.50 Less: Budgeted Factory Overhead for standard Hours allowed: (180 chairs x 2.4 hours per chair) X 5.75 per direct labor hour Budgeted Rixed Overhead Cost 1300.00 2,484.00 Total budgeted overhead for standard hours allowed3,784.00 Overhead Efficiency Variance 103.50 (U) (103.50 unfavorable) B. Overhead Volume Variance (the Second in a Two-way Analysis or the 3784 (180chairs x 2.4 hour chair x $9.00/ direct labor hour 3,888 Third in a Three-Way Analysis) Budgeted Factory Overhead (from above) Less: Factory Overhead Applied: Overhead Volume Variance 104 F EvUE. repre an inieremental analysis to determine which m
