ACCOUNTING-Not only did our salespeople do a good job in meeting the sales budget
“Wonderful! Not only did our salespeople do a good job in meeting the sales budget this year, but our production people did a good job in controlling costs as well,” said Kim Clark, president of Martell Company. “Our $18,300 overall manufacturing cost variance is only 1.2% of the $1,536,000 standard cost of products made during the year. That’s well within the 3% parameter set by management for acceptable variances. It looks like everyone will be in line for a bonus this year.” |
The company produces and sells a single product. The standard cost card for the product follows: |
| Standard Cost Card—per Unit | ||
| Direct materials, 2 feet at $8.45 per foot | $ | 16.90 |
| Direct labor, 1.4 direct labor-hours at $16 per direct labor-hour | 22.40 | |
| Variable overhead, 1.4 direct labor-hours at $2.50 per direct labor-hour | 3.50 | |
| Fixed overhead, 1.4 direct labor-hours at $6 per direct labor-hour | 8.40 | |
| Standard cost per unit | $ | 51.20 |
The following additional information is available for the year just completed: |
| a. | The company manufactured 30,000 units of product during the year. |
| b. | A total of 64,000 feet of material was purchased during the year at a cost of $8.55 per foot. All of this material was used to manufacture the 30,000 units. There were no beginning or ending inventories for the year. |
| c. | The company worked 43,500 direct labor-hours during the year at a direct labor cost of $15.80 per hour. |
| d. | Overhead is applied to products on the basis of standard direct labor-hours. Data relating to manufacturing overhead costs follow: |
| Denominator activity level (direct labor-hours) | 35,000 | |
| Budgeted fixed overhead costs | $ | 210,000 |
| Actual variable overhead costs incurred | $ | 108,000 |
| Actual fixed overhead costs incurred | $ | 211,800 |
| 3. | For manufacturing overhead compute: |
| a. | The variable overhead rate and efficiency variances for the year. (Round Standard Rate and Actual Rate to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). |
-
Rating:
/5
Solution: ACCOUNTING-Not only did our salespeople do a good job in meeting the sales budget