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Variance Analysis: Materials, Labor, and Factory Overhead; Job Order Costing . In an overseas location, Warrenton Fashions Inc. manufactures ladies' blouses of one quality, produced

Variance Analysis: Materials, Labor, and Factory Overhead; Job Order Costing.

In an overseas location, Warrenton Fashions Inc. manufactures ladies' blouses of one quality, produced in lots to fill each special order. Its customers are department stores located in various cities. Warrenton sews the particular stores' labels in the blouses. The standard costs for a dozen blouses are: Direct materials 24 yards at $1.10 = $26.40 Direct labor 3 hours at $4.90 = 14.70 Factory overhead 3 hours at $4.00 = 12.00

Standard cost per dozen $53.10

During June, Warrenton worked on three orders, for which the month's job cost records disclose the following:

Lot Number Units in Lot (dozens) Material Used (yards) Hours Hours Worked

22 1 ,000 24,100 2,980 23 1 ,700 40,440 5,130 24 1 ,200 28,825 2,890

The following information is also available: (a) Warrenton purchased 95,000 yards of material during June at a cost of $106,400. The materials price variance is recorded when goods are purchased. All inventories are carried at standard cost. (b) Direct labor during June amounted to $55,000. According to payroll records, production employees were paid $5 per hour (The legal minimum wage in this location is $4 per hour.) (c) Factory overhead during June amounted to $45,600.

(d) A total of $576,000 was budgeted for factory overhead for the year, based on estimated production at the plant's normal capacity of 48,000 dozen blouses annually. Factory overhead at this level of production is 40% fixed and 60% variable. Factory overhead is applied on the basis of direct labor hours. (e) There was no work in process at June l . During June, Lots 22 and 23 were completed. All material was issued for Lot 24, which was 80% completed as to direct labor.

Required: (l) Prepare a schedule showing the computation of standard cost of Lots 22, 23, and 24 for June. (2) Prepare a schedule showing the computation of the materials purchase price variance

(3) Prepare a schedule showing, for each lot produced during June, computations of the following variances, indicating whether they are favorable or unfavorable:

(a)Materials quantity variance

(b) Labor efficiency variance (c) Labor rate variance

(4) Prepare a schedule showing computations of the factory overhead controllable and volume variances for June. Indicate whether the variances are favorable or unfavorable.

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