Roots manufacture coffee mugs that its sells to other companies for customizing with their own logos. Root prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 59,900 coffee mugs per month

Requirement 1. 

Compute the cost and efficiency variances for direct materials and direct labor
Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U).

Actual cost and production information for July 2014 follows:

Transcribed Image Text:

Formula Variance Direct materials cost variance (AC - SC) x AQ 1,200F Direct labor cost variance (AQ - SQ) x SC %3D Data Table Direct Materials ( 0.2 Ibs as 0.25 per lb) $ 0.05 Direct Labor ( 3 minutes a $ 0.10 per minute) 0.30 Manufacturing Overhead: ( 3 minutes @ s 0.04 per minute) $ Variable 0.12 0.39 0.51 Fixed ( 3 minutes a S 0.13 per minute) %24 0.06 Total Cost per Colfoe Mug Formula Variance Direct materials cost variance (AC - SC) x AQ 1,200F Direct labor cost variance (AQ - SQ) x SC %3D Data Table Direct Materials ( 0.2 Ibs as 0.25 per lb) $ 0.05 Direct Labor ( 3 minutes a $ 0.10 per minute) 0.30 Manufacturing Overhead: ( 3 minutes @ s 0.04 per minute) $ Variable 0.12 0.39 0.51 Fixed ( 3 minutes a S 0.13 per minute) %24 0.06 Total Cost per Colfoe Mug

Answer rating: 100% (QA)

The standard cost income statement is given as below Standard Cost Income Statement For the Month E... View the full answer