Spiderbox companies produce ice boxes for the frozen food

Spiderbox companies produce ice boxes for the frozen food market. The company had been struggling with meeting its budget and determined that it was largely due to labor issues and an inexperienced workforce as they were late entrants into the market. At the beginning of January, they started hiring experienced workers from one of their competitors to try to fix their labor issue. During February, the company produced 1,250 boxes.

Total actual costs incurred for the month of February:

Fixed Overhead $15,000

Actual Labour (6,000 direct labour hours) $115,200

Actual Material (24,600 kilograms purchased and used) $56,580

The Standard Cost Per Unit:

Direct Labour (5.0 hours @ $18.00 per hour) $90.00

Direct Material (18 kg. @ $2.20 per kg.) 39.60

Variable Overhead (5.0 hours @$1.50 per direct labor hour) 7.50

Fixed Overhead (5.0 hours @ $3.20 per direct labor hour) 16.00

Per Unit Cost $153.10

February Budgeted Information:

Fixed Overhead for the month of $15,000

Planned Activity for the month 5,000 direct labor hours

Required:

a) From the foregoing information, compute the following variances for February. Also, identify whether the variance is favorable (F) or unfavorable (U):

i) Material price variance 

ii) Material quantity variance 

iii) Direct labor rate variance 

iv) Direct labor efficiency variance 

v) Fixed overhead budget variance 

vi) Fixed overhead volume variance 

b) Comment on whether Spiderbox was able to fix the problem with regards to their labor issue. Explain. Also, comment/interpret the Fixed Overhead variances. 


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