Gerald/Brooke, Ltd. manufactures shirts, which it sells to customers for embroidering with various slogans and emblems. The standard cost card for the shirts is as follows.
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Standard Price
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Standard Quantity
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Standard Cost
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Direct materials
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$1.6 per yard
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1.25 yards
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$2
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Direct labor
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$12 per DLH
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0.25 DLH
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3
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Variable overhead
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$4 per DLH
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0.25 DLH
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1
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Fixed overhead
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$6 per DLH
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0.25 DLH
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1.5
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$7.50
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Bobby Brickley, operations manager, was reviewing the results for November when he became upset by the unfavorable variances he was seeing. In an attempt to understand what had happened, Bobby asked CFO Lila Davis for more information. She provided the following overhead budgets, along with the actual results for November.
The company purchased and used 116,400 yards of fabric during the month. Fabric purchases during the month were made at $1.45 per yard. The direct labor payroll ran $251,559, with an actual hourly rate of $12.1 per direct labor hour. The annual budgets were based on the production of 1,004,950 shirts, using 256,500 direct labor hours. Though the budget for November was based on 89,700 shirts, the company actually produced 83,160 shirts during the month.
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Variable Overhead Budget
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Annual Budget
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Per Shirt
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November-Actual
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Indirect material
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$452,400
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$0.45
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$38,000
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Indirect labor
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303,700
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0.3
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34,460
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Equipment repair
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202,400
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0.2
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20,000
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Equipment power
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52,200
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0.05
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13,900
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Total
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$1,010,700
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$1.00
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$106,360
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Fixed Overhead Budget
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Annual Budget
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November-Actual
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Supervisory salaries
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$264,500
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$22,100
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Insurance
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351,300
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31,600
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Property taxes
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81,300
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7,300
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Depreciation
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320,000
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38,000
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Utilities
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211,200
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21,700
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Quality inspection
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282,000
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32,800
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Total
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$1,510,300
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$153,500
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(a) Calculate the direct materials price and quantity variances for November.
(b) Calculate the direct labor rate and efficiency variances for November.
(c) Calculate the variable overhead spending and efficiency variances for November.
(d) Calculate the fixed overhead spending variance for November.