Wilson's Winter Woolens manufactures jackets and other wool clothing. A certain designed ski parka requires the following:

Direct materials standard: 2 square yards at $13.50 per yard

Direct manufacturing labor standard: 1.5 hours at $20.00 per hour

During the third quarter, the company made 1,500 parkas and used 3,150 square yards of fabric costing $39,375. Direct labor totaled 2,100 hours for $45,150.

Required:

a. Compute the direct materials price and efficiency variances for the quarter.

b. Compute the direct manufacturing labor price and efficiency variances for the quarter.

Discussion Questions

1. What is ABC Costing and how can it make a difference in the way a company prices its products?

2. Discuss the cost hierarchy categories. Why do we categorize cost this way?

3. Discuss the importance of making a budget.

4. Discuss the reason for budgeting in multinational companies.

5. Discuss the different types of Standards that are considered when dealing with variances.

6. What is a Flexible Budget? How is it realized? What is its function in term of variances? What is a Static Budget?

7. Discuss the three variance levels. What is the purpose of having these levels?

8. Discuss what is the significance of a Variable Overhead Flexible Budget Variance of $10,500 U?