I think I got the first two question, but post your answer anyway just for check
ID: 2455212 • Letter: I
Question
I think I got the first two question, but post your answer anyway just for checkup. I need help with the answers to the last two question.
VARIABLE MANUFACTURING OVERHEAD, VARIANCE ANALYSIS
Esquire Clothing is a manufacturer of designer suits. The cost of each suit is the sum of three variable costs (direct material costs, directmanufacturing labor costs, and manufacturing overhead costs) and one fixed- cost category (manufacturing overhead costs). Variable manufacturing overhead cost is allocated to each suit on the basis of budgeted direct manufacturing labor-hours per suit. For June 2014, each suit is budgeted to take 4 labor-hours. Budgeted variable manufacturing overhead cost per labor- hour is $12. The budgeted number of suits to be manufactured in June 2014 is 1,040. Actual variable manufacturing costs in June 2014 were $52,164 for 1,080 suits started and completed. There were no beginning or ending inventories of suits. Actual direct manufacturing labor-hours for June were 4,536.
REQUUIREMENTS:
1. Compute the flexible- budget variance, the spending variance, and the efficiency variance for variable manufacturing overhead.
2. Comment on the results.
FIXED MANUFACTURING OVERHEAD, VARIANCE ANALYSIS
Esquire Clothing allocates fixed manufacturing overhead to each suit using budgeted direct manufacturing labor-hours per suit. Data pertaining to fixed manufacturing overhead costs for June 2014 are budgeted, $62,400, and actual, $63,916.
REQUIREMENTS:
1. Compute the spending variance for fixed manufacturing overhead. Comment on the results.
2. Compute the production-volume variance for June 2014. What inferences can Esquire Clothing draw from this variance?
Explanation / Answer
Answer 1: Fixed manufacturing overhead analysis
Spending variance fixed manufacturing overhead = budgeted amount - actual amount
= 62400-63916
= -1516
Spending variance for fixed manufacturing overhad is unfavorable.
Answer -2 Production volume variance
Production volume variance = (Actual units produced - Budgeted units produced) x Budgeted overhead rate
= (1080-1040)*15.00
= 40*15
= 600 favourable
Production volume variance is favorable due to excess production of 40 suits.
Actual suit manufacture 1080 standard suit manufacture 1040 Standard hours for direct labor hours 4 Total standard hours of direct labor 4320 budgeted manufacturing cost 62400 standard fixed manufacturing cost 14.44 Budgeted fixed manufacturing cost 62400/1040*4 15.00