Compute the variable-overhead efficiency variance

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Reference no: EM133496123

Kalama Kayak Company makes molded plastic kayaks. Standard costs for an entry-level whitewater kayak are as follows:

Direct materials, 20 lb at $5.00/lb $100

Direct labor, 2.00 hr at $13/hr $26

Overhead, at $9 per kayak $9

Total $135

The overhead rate assumes production of 350 kayaks per month. The overhead cost function is $70 + ($8.80 x number of kayaks). During March, Kalama produced 320 kayaks and had the following actual results:

Requirements

1. Compute material, labor, and overhead variances.

2. Interpret the variances.

3. Suppose the cost function for variable overhead was $4.40 per labor hour instead of $8.80 per kayak. Compute the variable-overhead efficiency variance and the total overhead spending variance. Would these variances lead you to a different interpretation of the overhead variances from the interpretation in requirement 2? Explain.

Requirement

Compute material, labor, and overhead variances. (Enter all amounts as positive numbers.)

Begin by calculating the price variance for materials. First enter the formula, then compute the variance. Be sure to label the variance as favorable (F) or unfavorable (U).

Reference no: EM133496123

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