Comprehensive; all variances; all methods Hellier Contractors paints interiors of residences and commercial structures. The firm's management has established cost standards per 100 square feet of area to be painted. Direct Materials ($18 per gallon of paint)= $1.50 Direct Labor= $2.00 Variable overhead= $0.60 Fixed overhead (based on 600,000 square feet per month)= $1.25 Management has determined that 400 square feet can be painted by the average worker each hour. During May, the company painted 600,000 square feet of space and incurred the folloing costs: Direct Materials (450 gallons purchased as used)= $8,300.00 Direct Labor (1,475 hours)= $12,242.50 Variable Overhead= $3,480.00 Fixed Overhead= $7,720.00 b. Compute the direct labor variences. c. Use a four-varience approach to compute overhead variences. d. Use a three-varience approach to compute overhead variences. e. Use a two-varience approach to compute overhead variences. f. Reconcile your answers for (c) through (e). g. Discuss other cost drivers that could be used as a basis for measuring activity and computing variences for this company.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Comprehensive; all variances; all methods Hellier Contractors paints interiors of residences and commercial structures. The firm's management has established cost standards per 100 square feet of area to be painted.
Direct Materials ($18 per gallon of paint)= $1.50
Direct Labor= $2.00
Variable
Fixed overhead (based on 600,000 square feet per month)= $1.25
Management has determined that 400 square feet can be painted by the average worker each hour. During May, the company painted 600,000 square feet of space and incurred the folloing costs:
Direct Materials (450 gallons purchased as used)= $8,300.00
Direct Labor (1,475 hours)= $12,242.50
Variable Overhead= $3,480.00
Fixed Overhead= $7,720.00
b. Compute the direct labor variences.
c. Use a four-varience approach to compute overhead variences.
d. Use a three-varience approach to compute overhead variences.
e. Use a two-varience approach to compute overhead variences.
f. Reconcile your answers for (c) through (e).
g. Discuss other cost drivers that could be used as a basis for measuring activity and computing variences for this company.
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