The Moore Company produces and sells a single product. A standard cost card for the product follows:
Question:
The Moore Company produces and sells a single product. A standard cost card for the product follows:
Standard Cost Card - per unit of product
Direct materials, 4 metres at $4.00 $16.00
Direct labour, 1.5 hours at $10.00 $15.00
Variable overhead, 1.5 hours at $3.00 $4.50
Fixed overhead, 1.5 hours at $7.00 $10.50
Standard cost per unit $46.00
The company manufactured and sold 18,000 units of product during the year. A total of 70,200 metres of material was purchased during the year at a cost of $4.20 per metre. There was no beginning inventory of materials on hand to start the month; at the end of the month, 1,400 metres of material remained in the warehouse unused.
The company worked 29,250 direct labour-hours during the year at a cost of $9.75 per hour.
Overhead cost is applied to products on the basis of direct labour-hours. The denominator (budgeted) activity level was 22,500 direct labour hours. Budgeted fixed overhead costs as shown on the flexible budget were $157,500, while actual fixed overhead costs were $156,000. Actual variable overhead costs were $90,000.
Required:
1.Compute the following variances for the year:
a.Compute the direct materials price & efficiency variances for the year.
b.Compute the direct labour price & efficiency variances for the year.
c.Compute the variable overhead spending & efficiency variances for the year.
d.Compute the fixed overhead spending & pvv variances for the year.Round all calculations to nearest dollar.
2.Pick out the two most significant (largest) variances you computed in part 1 above.Explain to management the possible causes of these selected variances.
Expert Answer:
1 Compute the variances a Direct Materials Variances Price Variance Actual Price Standard Price x Ac... View the full answer
