Reference no: EM132757960
Clair Rogers, vice-president of XYZ Company, was pleased to see a small variance on the income statement after the trouble the company had been having in controlling manufacturing costs. She noted that the $17,016 overall manufacturing variance reported last period was well below the 3% limit that had been set for variances. The company produces and sells a single product. The standard cost card for the product follows:
Standard Cost Card-Per Unit
Direct materials, 4 metres at $2.60 per metre$10.40
Direct labour, 1.6 direct labour-hours at $10.0 per direct labour-hour 16.00 V
ariable overhead, 1.6 direct labour-hours at $2.7 per direct labour-hour 4.32
Fixed overhead, 1.6 direct labour-hours at $5 per direct labour-hour 8.00
Standard cost per unit$38.72
The following additional information is available for the year just completed:
- The company manufactured 21,000 units of product during the year.
- A total of 83,020 metres of material was purchased during the year at a cost of $2.80 per metre. All of this material was used to manufacture the 21,000 units. There were no beginning or ending inventories for the year.
- The company worked 34,700 direct labour-hours during the year at a cost of $9.80 per hour.
Overhead cost is applied to products on the basis of standard direct labour-hours. Data relating to manufacturing overhead costs follow:
Denominator activity level (direct labour-hours) 32,800
Budgeted fixed overhead costs (from the flexible budget)$164,000
Actual fixed overhead costs$162,350
Actual variable overhead costs$95,270
Required:
Problem 1. Compute the direct materials price and quantity variances for the year