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Compute the materials usage variance

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Reference no: EM13337228

Problem:

Peaceful Corporation manufactures figurines based on the following information.

Standard costs $20
Materials (4 ounces at $5) $8
Direct labor (1 hour per unit) $4
Variable overhead (based on direct labor hours)

Fixed overhead budget
$19,000
Actual results and costs

Materials purchased

Units 9,000
Cost $39,600
Materials used in production

Finished product units 2,000
Raw material (ounces) 8,200
Direct labor hours 2,000
Direct labor cost $20,000
Variable overhead costs $5,980
Fixed overhead costs $19,500

Required:

  1. Prepare a performance report for Peaceful using the following headings.
    1. Actual Production Costs
    2. Flexible Budget Costs
    3. Flexible Budget Variances
  2. Compute the following variances (show calculations).
    1. Materials usage variance
    2. Labor rate variance
    3. Labor efficiency variance
    4. Variable overhead spending variance
    5. Variable overhead efficiency variance
    6. Fixed overhead budget variance
  3. Give one possible explanation for each of the six variances computed in part b.

Reference no: EM13337228

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