Check Figures: Materials Quantity Variance: $30,780 F

Variable Overhead Spending(Rate) Variance: $2,976 U

Alibaba, Inc. manufactures custom embroidered jackets. To control costs the company uses a standard cost system. The company has developed the following standards to produce one jacket:

Standard Costs:

Direct Material 3 sq. ft $3.80 per sq. ft .

Direct Labor 2.0 hr. $9.50 per hr.

Variable Manufacturing Overhead 2.0 hr. $0.58 per hr.

Fixed Manufacturing Overhead 2.0 hr. $2.25 per hr.

2019 Budgeted Data for November:

Budgeted production, 14,250 jackets

Denominator Hours, 28,500 DLH. (Alibaba, Inc. applies overhead on the basis of direct labor hours.)

Budgeted variable overhead, $16,530

Budgeted fixed overhead, $64,125.

2019 Actual Results for November:

Direct material purchases were 33,000 sq. ft. for a total cost of $128,700.

Direct material used was 32,400 sq. ft.

Direct labor costs was $240,560 for 24,800 direct labor hours actually worked.

Total variable manufacturing overhead was $17,360.

Total fixed manufacturing overhead was $56,565.

Actual production was 13,500 jackets.

REQUIRED:

1. Calculate the following variances:

a. materials price and quantity variances.

b. labor rate and efficiency variances.

c. variable overhead rate(spending) and efficiency variances.

d. fixed overhead budget and volume variances.

2. Conclusion: (Worth 6 pts.) Add a separate sheet within your excel workbook and change the name of the sheet to Conclusion. Alibaba, Inc.s management intentionally purchased superior quality materials for November production. Answer the following questions:

1. How did this decision affect the other cost variances? Do you think the higher quality material purchased was the cause for these other variances? How?

2. What do you think may have caused some of the other variances if it was not due to the purchase of higher quality material? Give several examples.

3. Overall, do you think this was a wise decision? Explain. Support your position with an analysis of the data. (Hint: Summarize the variances. Is there a net unfavorable or favorable variance?)