Question

Styles Inc. manufactures a full line of well-known sunglasses frames and lenses. Styles uses a standard costing system to set attainable standards for direct materials, labour, and overhead costs. Styles reviews and revises standards annually, as necessary. Department managers, whose evaluations and bonuses are affected by their department’s performance, are held responsible to explain variances in their department performance reports.
Recently, the manufacturing variances in the Image prestige line of sunglasses have caused some concern. For no apparent reason, unfavourable materials and labour variances have occurred. At the monthly staff meeting, Jack Barton, manager of the Image line, will be expected to explain his variances and suggest ways of improving performance. Barton will be asked to explain the following performance report for 2013:
Barton collected the following information:
Three items comprised the standard variable manufacturing costs in 2013:
◆ Direct materials: Frames. Static-budget cost of $49,500. The standard input for 2013 is 3.00 g per unit.
◆ Direct materials: Lenses. Static-budget costs of $139,500. The standard input for 2013 is 6.00 g per unit.
◆ Direct manufacturing labour: Static-budget costs of $135,000. The standard input for 2013 is 1.20 hours per unit.
Assume there are no variable manufacturing overhead costs.
The actual variable manufacturing costs in 2013 were:
◆ Direct materials: Frames. Actual costs of $55,872. Actual grams used were 3.20 g per unit.
◆ Direct materials: Lenses. Actual costs of $150,738. Actual grams used were 7.00 g per unit.
◆ Direct manufacturing labour: Actual costs of $145,355. The actual labour rate was $14.80 per hour.
REQUIRED
1. Prepare a report that includes:
a. Selling-price variance.
b. Sales-volume variance and flexible-budget variance for operating income in the format of the analysis in Exhibit 7-6.
b. Price and efficiency variances for:
◆ Direct materials: frames.
◆ Direct materials: lenses.
◆ Direct manufacturing labour.
2. Give three possible explanations for each of the three price and efficiency variances at Styles in requirement 1c.


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  • CreatedJuly 31, 2015
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