Reference no: EM13876833

Comprehensive Variance Analysis Organet Stamping Company manufactures a variety of prod- ucts made of plastic and aluminum components. During the winter months, substantially all pro- duction capacity is devoted to lawn sprinklers for the following spring and summer seasons. Other products are manufactured during the remainder of the year. Because a variety of products are man- ufactured throughout the year, factory volume is measured using production labor hours rather than units of production.

Production volume has grown steadily for the past several years, as the following schedule of production labor indicates:

This year                         32,000 hours

1  year ago                      30,000 hours

2  years ago                    27,000 hours

3  years ago                    28,000 hours

4  years ago                    26,000 hours

The company has developed standard costs for its several products. It sets standard costs for each year in the preceding October. The standard cost of a sprinkler this year was $4.00, computed as follows:

Direct materials:

Aluminum	0.2 pound x $0.40 per pound	$0.08
Plastic	1.0 pound x $0.38 per pound	0.38
Production labor	0.3 hour x $9.00 per hour	2.70
Overhead:
Variable	0.3 hour x $1.60 per hour	0.48
Fixed*	0.3 hour x $1.20 per hour	0.36
Total		$4.00

* Calculated using 30,000 production labor-hours per year as practical capacity.

During February of this year, 8,500 good sprinklers were manufactured. The following costs were incurred and charged to production:

Materials requisitioned for production:

Aluminum	(1,900 pounds x $0.40 per pound)	$   760
Plastic: Regular	(6,000 pounds x $0.38 per pound)	2,280
Low grade†	(3,500 pounds x $0.38 per pound)	1,330
Production labor:
Straight time	(2,300 hours x $10.00 per hour)	23,000
Overtime	(400 hours x $15.00 per hour)	6,000
Overhead:
Variable	$5,200
Fixed	3,100	8,300
Costs charged to production		$41,670

Materials price variations are charged to a materials price variation account at the time the invoice is entered. All materials are carried in inventory at standard prices. Materials purchases for February follow:

Aluminum	(1,800 pounds x $0.48 per pound)	$864
Plastic:
Regular grade	(3,000 pounds x $0.50 per pound)	1,500
Low grade†	(6,000 pounds x $0.29 per pound)	1,740

† Plastic shortages forced the company to purchase lower-grade plastic than called for in the standards, which increased the number of sprinklers rejected on inspection.

Required: Compute the following for February:

1. The total variance from standard cost for the units produced this period.

2. The spending (budget) variance for the fixed portion of overhead costs.

3. The labor efficiency variance.

4. The labor rate variance.

5. The total variable manufacturing cost variance.

6. The variable overhead spending, efficiency, and flexible-budget variances.

7. The production-volume variance.

8. The materials variances (purchase-price and usage). Also comment on the effects of using materials of different grades.