Reference no: EM132633266

Dynamic Sports Inc., produces a broad line of sports equipment and uses a standard cost system for control purposes. Last year the company produced 8,000 varsity footballs. The standard costs associated with this football, along with the actual costs incurred last year, are given below (per football):

Standard            Actual Cost           Cost Direct materials:

Standard: 3.7 feet at $5.00 per foot . . . . . . . . $18.50

Actual: 4.0 feet at $4.80 per foot . . . . . . . . . . $19.20

Direct labour:

Standard: 0.9 hour at $7.50 per hour . . . . . . . 6.75

Actual: 0.8 hour at $8.00 per hour . . . . . . . . . 6.40

Variable manufacturing overhead:

Standard: 0.9 hour at $2.50 per hour . . . . . . . 2.25

Actual: 0.8 hour at $2.75 per hour . . . . . . . . . 2.20

Total cost per football . . . . . . . . . . . . . . . . . . . . . $27.50 $27.80

The president was delighted when he saw that actual costs exceeded standard costs by only $0.30 per football. He stated, "I was afraid that our unit cost might get out of hand when we gave out those raises last year in order to stimulate output. But it's obvious our costs are well under control." There was no inventory of materials on hand to start the year. During the year, 32,000 feet of materials were purchased and used in production.

Required:

Question a) For direct materials calculate the price and quantity variances for the year.

Question b) For direct labour calculate the rate and efficiency variances for the year.

Question c) Calculate the variable overhead spending variance: AH (AR - SR) and variable overhead efficiency variance: SR (AH - SH) for the year.

Question d) Was the president correct in his statement that "our costs are well under control"? Explain.

Question e) State TWO possible causes of each direct material variance and each direct labour variance that you have to calculated