The standard cost for variances (15 marks)

Assume that during the past month, Sanford produced 10,000 cartons of Liquid ACCENT highlighters. Liquid ACCENT offers a translucent barrel and cap with a visible ink supply for see-through color. The special fluorescent ink is fade- and water-resistant. Each carton contains 100 boxes of marker, and each box contains five markers. The markers come in boxes of one of five fluorescent colors-orange, blue, yellow, green, and pink-and in a five- color set.

Assume the following additional facts: The standard cost for one carton of 500 markers is as follows.

Standard

Manufacturing Cost Elements

Direct materials Tips (boxes of 500)

Translucent barrels and caps (boxes of 500)

Fluorescent ink (100 oz. containers)

Total direct materials Direct labor

Manufacturing overhead

Quantity500

500100 oz.

0.25 hrs0.25 hrs

Price =

$ 0.03 = $ 0.09 = $ 0.32 =

$ 9.00 = $48.00 =

Cost

15.00

45.00

32.00

92.00 2.25

12.00 $106.25

$

During the month, the following transactions occurred in manufacturing the 10,000 cartons of highlighters.

Purchased 10,000 boxes of tips for $148,000 ($14.80 per 500 tips); purchased 10,200

boxes of translucent barrels and caps for $453,900 ($44,50 per 500 barrels and caps); and

purchased 9,900 containers of fluorescent ink for $328,185 ($33.15 per 100 ounces).

All materials purchased during the period were used to make markers during the period.

2,300 direct labor hours were worked at a total labor cost of $20,240 (an average hourly

rate of $8.80).

Variable manufacturing overhead incurred was $34,600, and fixed overhead incurred was

$84,000.

The manufacturing overhead rate of $48.00 is based on a normal capacity of 2,600 labor hours. The total budget at this capacity is $83,980 fixed and $40,820 variable.

Instructions

a) Compute the total variance and the variances for direct materials and direct labour

elements (5 Marks).

b) Compute the total variance for manufacturing overhead (5 Marks).

c) Explain and compare the results of Favourable and Unfavourable in point a and b