Kohler Clothiers manufactures women’s business suits. The company uses a standard cost accounting system. In March 2022, 15,700 suits were made. The following standard and actual cost data applied to the month of March, when normal capacity was 20,000 direct labour hours. All materials purchased were used in production: 

Overhead is applied based on direct labour hours. At normal capacity, budgeted fixed overhead costs were $125,000, and budgeted variable overhead costs were $63,000. 

Instructions 

a. Calculate the total, price, and quantity variances for materials and labour, and calculate the total, overhead budget, and volume variances for manufacturing overhead. 

b. Which of the materials and labour variances should be investigated if management considers a variance of more than 5% from standard to be significant? Discuss the potential causes of the variance(s)

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Cost Element Direct materials Direct labour Overhead Standard (per unit) 5 m at $6.75 per metre 1 hour at $11.45 per hour 1 hour at $9.40 per hour (fixed $6.25; variable $3.15) Actual $547,200 for 76,000 m ($7.20 per metre) $165,760 for 14,800 hours ($11.20 per hour) $120,000 fixed overhead $ 49,000 variable overhead