The roofing company manufactures shingles.

Standard Cost Sheet per shingle

Direct materials

Asphalt

1.5

pounds

$0.07

per pound

Direct labor

0.01

direct labor hour

$10

per hour

Variable Manufacturing overhead

0.01

direct labor hour

$2

per hour

Fixed Manufacturing overhead

0.01

direct labor hour

$10

per hour

Total standard cost per shingle

Budgeted fixed manufacturing overhead for the period is

$60,000

Budgeted units to be produced

600,000

Units

Standard fixed manufacturing overhead based on expected capacity of

6000

direct labor hours

The following information is available regarding the company's actual operations for the period.

Shingles produced

530,000

Materials purchased:

Asphalt

760,000

pounds

$0.08

per pound

Materials used

Asphalt

750,000

pounds

Direct labor

5,000

hours

$11.00

per hour

Manufacturing overhead incurred:

Variable

$11,050

$2.21

VOH rate per direct labor hour

Fixed

$59,000

Grading Rubric

Each Variance calculation worth

0.75

pts.

Each U or F designation

0.25

pts.

1

pt. each for variance

Comments

0.5

Total pts. Possible

8.5 pts.

Required: Make sure you do not forget to label the variances U or F. You need to show your work either by cell reference or showing your calculation to the side.

1. Calculate the direct materials price and quantity variance.

Direct-material purchase price variance should be based on material purchased, since you want to isolate the variance as soon as possible. See bottom page 418

Direct-material Quantity variance should be based on materials used, since this is monitoring the production efficiency. See top of page 418.

Direct-material purchase price variance

Direct Material Quantity variance

2. Calculate the direct labor rate and efficiency variances.

Labor rate variance

Labor Efficiency variance

3. Variable manufacturing overhead spending and efficiency variances.

Variable overhead spending variance

Variable overhead efficiency variance

4. Fixed manufacturing overhead budget and volume variances.

Fixed Manufacturing overhead budget variance

Fixed overhead volume variance

5. Pick out the two variances that you computed above that you think should be further investigated. Explain why you picked these 2 variances and what might be the possible cause of the variances.