Problem 67. Swish Company produces magic swishers. It uses units as the allocati
ID: 2451673 • Letter: P
Question
Problem 67. Swish Company produces magic swishers. It uses units as the allocation basis for overhead. The following information was provided concerning its standard cost system for 2018:
Standard Data
Actual Data
Material
1/2 lb. @ $15.00 per lb.
Produced
2,030 units
Labor
1.2 hrs. @ $12 per hr.
Materials purchased
1,050 lbs. for $14,700
Budgeted fixed overhead
$62,000
Materials used
1,080 lbs.
Budgeted variable overhead
$8.50 per unit
Labor worked
2,500 hrs. costing $29,375
Budgeted production
2,000 units
Actual overhead
$61,700 fixed; $22,400 variable
A. Calculate all labor variances. Explain what information is provided by each.
B. If 2% is the threshold for materiality, indicate which variances should be investigated and who is responsible for each.
C. Calculate all material variances. Explain what information is provided by each.
D. If 2% is the threshold for materiality, indicate which variances should be investigated and who is responsible for each.
Standard Data
Actual Data
Material
1/2 lb. @ $15.00 per lb.
Produced
2,030 units
Labor
1.2 hrs. @ $12 per hr.
Materials purchased
1,050 lbs. for $14,700
Budgeted fixed overhead
$62,000
Materials used
1,080 lbs.
Budgeted variable overhead
$8.50 per unit
Labor worked
2,500 hrs. costing $29,375
Budgeted production
2,000 units
Actual overhead
$61,700 fixed; $22,400 variable
Explanation / Answer
Direct labor rate var.
= Flexible budget costs - Actual costs
= (2500 x 12) – 29,375
= 30,000 – 29,375
= 625 favorable
Actual cost is less than the standard cost thus variance is favorable
Direct mat'ls price var.
= Flexible budget costs - Actual costs
= 1050 * 15 - 14700
= 15,750 – 14,700
= 1050 Favorable
Actual cost is less than the standard cost thus variance is favorable