Question

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

Standards:
Direct materials 22.0 yards per awning at $ 13.00 per yard
Direct labor 5.0 hours per awning at $ 15.00 per hour
Variable MOH standard rate $ 8.00 per direct labor hour
Predetermined fixed MOH standard rate $ 6.00 per direct labor hour
Total budgeted fixed MOH cost $ 63,500
Actual cost and operating data from the most recent month are as follows:
Purchased 51,260 yards at a total cost of $ 661,254
Used 47,500 yards in producing 2,200 awnings
Actual direct labor cost of $ 168,175 for a total of 10,850 hours
Actual variable MOH $ 93,310 Actual fixed MOH $ 67,500
All manufacturing overhead is allocated on the basis of direct labor hours.

Requirements
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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