Question

Grand Clothing is a manufacturer of designer suits. The cost of each suit is the sum of three variable costs (direct material costs, direct manufacturing labor costs, and manufacturing overhead costs) and one fixed- cost category ( manufacturing overhead costs). Variable manufacturing overhead cost is allocated to each suit on the basis of budgeted direct manufacturing labor- hours per suit. For June 2013 each suit is budgeted to take 4 labor- hours. Budgeted variable manufacturing overhead cost per labor- hour is $ 14. The budgeted number of suits to be manufactured in June 2013 is 1,020. Actual variable manufacturing costs in June 2013 were $ 67,650 for 1,000 suits started and completed. There were no beginning or ending inventories of suits. Actual direct manufacturing labor- hours for June were 4,510.

Required
1. Compute the flexible- budget variance, the spending variance, and the efficiency variance for variable manufacturing overhead.
2. Comment on the results.



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  • CreatedJanuary 15, 2015
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