Reference no: EM132564108

Question - Company Zeta manufactures action figures. The management accountant of Company Zeta is concerned whether there is much discrepancy between the actual variable manufacturing overhead and its budget. The analysis is for a specific month of the year, comparing the budgeted and actual figures.

The variable manufacturing overhead cost is allocated to each action figure based on budgeted direct manufacturing labour-hours per action figure. For the specific month of the year, each action figure is budgeted to take 2 labour-hours. Budgeted variable manufacturing overhead cost per labour-hour is $10. The budgeted number of action figures to be manufactured in this given month is 100.

Actual variable manufacturing overhead costs in the given month were $2,100 for 110 action figures started and completed. There was no opening or closing stock of action figures. Actual direct manufacturing labour-hours for this given month were 180.

Required -

1. Calculate the static-budget variance, the flexible-budget variance, and the sales-volume variance for variable manufacturing overhead.

2. Based on the above answer, comment on what has caused the discrepancy between the actual variable manufacturing overhead and its budget.

3. Calculate the spending and efficiency variances for the given month and identify what has caused the flexible-budget variance for Company Zeta.