The accountants at Value Vases developed the following standards for producing exquisite vases from a liquid silicate:
Question:
The accountants at Value Vases developed the following standards for producing exquisite vases from a liquid silicate:
Direct materials 2.5 gallons @ $5 per gallon
Direct labor 3.5 hours @ $15 per hour
Variable overhead $10.00 per direct labor hour
Fixed overhead $5.00 per direct labor hour
Value’s volume of direct labor hours for normal costing is 1,680 each month. In a recent month, Value produced 500 vases and incurred the following costs:
Direct materials purchased & used 1,200 gallons @ $6 per gallon
Direct labor 1,700 hours @ $14 per hour
Variable overhead $15,000
Fixed overhead $8,500
a. Calculate the following eight variances.
i. Direct material price variance
ii. Direct material efficiency variance
iii. Direct labor price variance
iv. Direct labor efficiency variance
v. Variable overhead spending variance
vi. Variable overhead efficiency variance
vii. Fixed overhead spending variance
viii. Fixed overhead production volume variance
b. Suggest one possible cause for each of the following variances calculated in part (a):
i. Direct material price variance
ii. Direct labor efficiency variance
iii. Fixed overhead spending variance
Cost Management Measuring Monitoring and Motivating Performance
ISBN: 978-0470769423
2nd edition
Authors: Leslie G. Eldenburg, Susan K. Wolcott