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Calculate direct materials and manufacturing labor price

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Reference no: EM132019263

SallyMay, Inc., designs and manufactures T-shirts. It sells its T-shirts to brand name clothes retailers in lots of one dozen. SallyMay's May 2013 static budget and actual results for direct inputs are as follows:

Static Budget
Number of T-shirt lots (1 lot1 dozen) 400

Per Lot of T-shirts:
Direct materials 14 meters at $1.70 per meter$23.80
Direct manufacturing labor 1.6 hours at $8.10 per hour $12.96
Actual Results
Number of T-shirt lots sold 450

Total Direct Inputs:
Direct materials 6,840 meters at $1.95 per meter = $13,338
Direct manufacturing labor 675 hours at $8.20 per hour = $5,535

SallyMay has a policy of analyzing all input variances when they add up to more than 10% of the total cost of materials and labor in the flexible budget, and this is true in May 2013. The production manager discusses the sources of the variances: "A new type of material was purchased in May. This led to faster cutting and sewing, but the workers used more material than usual as they learned to work with it. For now, the standards are fine."

1. Calculate the direct materials and direct manufacturing labor price and efficiency variances in May 2013. What is the total flexible-budget variance for both inputs (direct materials and direct manufacturing labor) combined? What percentage is this variance of the total cost of direct materials and direct manufacturing labor in the flexible budget?

2. Sally King, the CEO, is concerned about the input variances. But she likes the quality and feel of the new material and agrees to use it for one more year. In May 2014, SallyMay again produces 450 lots of T-shirts. Relative to May 2013, 2% less direct material is used, direct material price is down 5%, and 2% less direct manufacturing labor is used. Labor price has remained the same as in May 2013. Calculate the direct materials and direct manufacturing labor price and efficiency variances in May 2014. What is the total flexible-budget variance for both inputs (direct materials and direct manufacturing labor) combined? What percentage is this variance of the total cost of direct materials and direct manufacturing labor in the flexible budget?

3. Comment on the May 2014 results. Would you continue the "experiment" of using the new material?

Verified Expert

The present paper is about standard costing and budgeting. It helps us to understand what causes variances and how the same can be removed with the reduction in the price of product and quantity. The new experiments can be favorable to the company.

Reference no: EM132019263

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urv2019263

10/13/2018 3:24:59 AM

please solve in excel format. Thanks for providing the solution in a typed format and also in the excel sheet. I don't have much knowledge about excel and me solving this assignment would have resulted in me getting zero. And now I feel like that it was a wise decision that I had chosen for sending my assignment to you people. Thanks for providing me with the solution according to my specifications.

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