Spiderbox companies produce ice boxes for the frozen food market. The company had been struggling with meeting
Question:
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.
Understandable Statistics Concepts and Methods
ISBN: 978-1337119917
12th edition
Authors: Charles Henry Brase, Corrinne Pellillo Brase