Merando Clothiers is a small company that manufactures tall-men\'s suits The com
ID: 2514529 • Letter: M
Question
Merando Clothiers is a small company that manufactures tall-men's suits The com pany has used a standard cost accounting system. In May 2005,11,200 suits were produced. pacity was 14,000 direct labor hours All materials purchased were used The following standard and actual cost data applied to the month of May when normal ca- Cost Element Standard (per unit) Actual Direct materials 8 yards at $4.50 per yard Direct labor Overhead $371,050 for 90,500 yards ($4.10 per yard) 1.2 hours at $13.00 per hour $201,630 for 14,300 hours 1.2 hours at $6.00 per hour ($14.10 per hour) $49,000 fixed overhead fixed $3.50; variable $2.50) $36,000 variable overbead Overhead is applied on the basis of direct labor hours At normal capacity, budgeted fixed over- head costs were $49,000, and budgeted variable overhead was $35,000 a) Determine the standard cost to make one tall-men's suit: (show all work) b) Prepare a report that evaluates the performance of the production manager for May: (you know some kind of comparison of budget too?) c) Discuss how the production manager did overall?Explanation / Answer
a) Standard cost to make one tall-men's suit Direct materials (8*4.5) 36 Direct labor (1.2*13) 15.6 Overhead (1.2*6) 7.2 Total cost 58.8 b) Flexible budget performance report Flexible Budget Actual results spending variances Direct materials 403200 371050 32150 F (11200*8*4.5) Direct labor 174720 201630 26910 U (11200*1.2*13) Overhead 80640 85000 4360 U (11200*1.2*6) (49000+36000) Total 658560 657680 880 F c) Total budgeted cost as per flexible budget eas $658560 However, Actual variance incurred was $657680. It means there is a favorable variance of $880. Production manager performed well .