Reference no: EM133186209
Question - Manlow Company makes a cologne called Allure. The standard cost for one bottle of Allure is as follows.
|
manufacturing cost element
|
quantity
|
price
|
=cost
|
|
Direct material
|
6oz.
|
0.90
|
$5.40
|
|
Direct labour
|
0.5 hrs
|
12.00
|
$6.00
|
|
Manufacturing overhead
|
0.5 hrs
|
4.80
|
$2.40
|
|
|
|
|
$13.80
|
During the month, the following transactions occurred in manufacturing 10,000 bottles of Allure. Fifty-eight thousand (58,000) ounces of materials were purchased at $1.00 per ounce.
All the materials purchased were used to produce 10,000 bottles of Allure.
Four thousand nine hundred (4,900) direct labour hours were worked at a total labour cost of $56,350.
Variable manufacturing overhead incurred was $15,000, and fixed overhead incurred was $10,400.
The manufacturing overhead rate of $4.80 is based on a normal capacity of 5,200 direct labour hours. The total budget at this capacity is $10,400 fixed and $14,560 variable.
Required -
a) Compute the total variance and the variances for direct materials and direct labour elements.
b) Compute the total variance for manufacturing overhead.
c) Explain the meaning of the result of total variances (Direct material, direct labour and manufacturing overhead).