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Q1) Headsmart produces headphone cases.  In  September 2011, company made 106,000 cases and recorded cost data given below:

 

Standard Cost Information

 

Quantity

Price

Direct materials

2 parts

$0.17 per part

Direct labor

0.02 hours

$9.00 per hour

Variable manufacturing overhead

0.02 hours

$10.00 per hour

 

Fixed manufacturing overhead ($32,640 for static budget volume of 96,000 units and 1,920 units and 1,920 hours, or $17 per hour)

 

Direct materials (265,000 parts were bought at $0.22 per part, 215,000 parts were used)

 

Direct labor (1,700 hours at $9.10 per hour=$15,652)

 

Manufacturing overhead $60,500 (30% was fixed)

 

a) Find out eight variances

 

1. Materials: VP=(AP-SP)AQ-(actual price-standard price)*actual quantity

 

   VQ=(AQ-SQ)*SP

 

2. Direct labor: VP=(AP-SP)*AQ  and VQ=(AQ-SQ)*SP

 

3. Variable overhead: VP=(AP-SP)*AQ  and VQ=(AQ-SQ)*SP

 

4. Fixed overhead:  SPENDING VARIANCE= actual fixed overhead incurred- fixed factory overhead budgeting

 

Production volume variance = fixed factory overhead budgeting - standard fixed overhead applied

 

b) Comment on variances

Accounting Basics, Accounting

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