Crispin Company uses a standard-cost system. The standard direct materials cost per unit is $20, consisting of 4 lb at $5 per lb. The standard direct labor cost per unit is $40, consisting of 2 hours at $20 per hour. The following represents a monthly flexible factory overhead budget for different levels of production within the relevant range of 10,000 units to 25,000 units:

Flexible budget cost information:

Additional information for the current period:

● Variable manufacturing overhead consists of supplies, indirect labor, and other incidentals such as maintenance; it is allocated based on direct labor hours.

● Fixed overhead consists of supervision and other fixed production salaries, factory property taxes and insurance, depreciation, and other fixed factory costs.

● The fixed overhead rate is based on practical (normal) capacity of 20,000 units.

● The company produced and sold 18,000 units.

● Actual direct labor costs were $805,000, consisting of 35,000 hours worked at an average rate of $23 per direct labor hour.

● Direct materials purchased were 56,000 lb at $7 per lb. Pounds used in production were 53,000.

● Actual manufacturing overhead included variable overhead of $55,500 and fixed overhead of $309,000.

a. Create a flexible budget for the 18,000 units produced and sold.

b. Calculate the direct materials price variance.

c. Calculate the direct materials quantity variance.

d. Calculate the direct labor rate variance.

e. Calculate the direct labor efficiency variance.

f. Calculate the variable overhead rate variance.

g. Calculate the variable OH efficiency variance.

h. Calculate the fixed overhead spending variance.

i. Calculate the fixed overhead volume variance.

j. Discuss how management could summarize the variances into a meaningful report that would be helpful for further action.

Transcribed Image Text:

Units Standard direct labor hours allowed Variable manufacturing overhead Fixed manufacturing overhead Direct materials Direct labor 14,000 22,000 28,000 44,000 $42,000 $66,000 $300,000 $300,000 25,000 50,000 $75,000 $300,000 $280,000 $440,000 $500,000 $560,000 $880,000 $1,000,000