Reference no: EM131123417

This compnay uses a standard cost system. There is no beginning or ending work in process, and finished goods inventory balances. You are asked to determine if the company is managing their costs effectively.

The following information was provided concerning the one product produced by this company for the period that just ended:

This company used Direct labor hours as the cost driver for the application of overhead.

Actual price per kilogram	$2.94
Actual kilograms of material used	31,500
Actual kilograms of material purchased	32,000
Actual hourly labor rate	$17.49
Actual hours of production	4,900labor hrs.
Standard price per kilogram	$2.96
Standard kilograms per completed unit	6
Standard hourly labor rate	$17.90
Standard time per completed unit	1Hour
Actual Variable factory overhead	$17,395.00
Actual Fixed factory overhead	$18,200.00
Standard fixed factory overhead rate	$3.25per labor hour
Standard variable factory overhead rate	$3.80 per labor hour
Budgeted fixed overhead	$18,300.00
Units completed during the period	4,950

A. Calculate the direct materials price and quantity variance.

Direct-material purchase price variance should be based on material purchased, since you want to isolate the variance as soon as possible.

Direct-material Quantity variance should be based on materials used, since this is monitoring the production efficiency.

Direct-material purchase price variance

Direct Material Quantity variance

B. Calculate the direct labor rate and efficiency variances.

Direct Labor rate variance

Direct Labor Efficiency variance

C. Variable manufacturing overhead spending and efficiency variances.

Variable overhead spending variance

Variable overhead efficiency variance

D. Fixed manufacturing overhead budget and volume variances.

Fixed Manufacturing overhead budget variance

Fixed overhead volume variance

E. Pick out the one most significant variance that you computed above and explain to me the possible causes of this variance and why you chose it.