Question: Dillon Awnings manufactures awnings and uses a standard cost system

Dillon Awnings manufactures awnings and uses a standard cost system. Dillon allocates overhead based on the number of direct labor hours. The following are the company’s cost and standards data:

Direct material 19.0 yards per awning at $ 13.00 per yard
Direct labor 4.0 hours per awning at $ 11.00 per hour
Variable MOH standard rate $ 5.00 per direct labor hour
Predetermined fixed MOH standard rate $ 10.00 per direct labor hour
Total budgeted fixed MOH cost $ 81,800

Actual cost and operating data from the most recent month follows:
Purchased 43,470 yards at a total cost of $ 547,722
Used 38,800 yards in producing 2,100 awnings
Actual direct labor cost of $ 92,624 for a total of 8,270 hours
Actual variable MOH cost $ 44,658
Actual fixed MOH cost $ 86,800

All manufacturing overhead is allocated on the basis of direct labor hours.

1. Calculate the standard cost of one awning.
2. Calculate the following variances:
a. The direct material variances.
b. The direct labor variances.
c. The variable manufacturing overhead variances.
d. The fixed manufacturing overhead variances.
3. Explain what each of the variances you calculated means and give at least one ­possible explanation for each of those variances. Are any of the variances likely to be interrelated?

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  • CreatedAugust 27, 2014
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