Answered: Compute the flexible- budget variance,…

Name: Esquire Clothing is a manufacturer of designer suits. The
Uploaded: 2024-03-20T06:33:06.000Z
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Description: Esquire Clothing is a manufacturer of designer suits. The cost of each suit is the sum of three variable costs (direct material costs, direct manufacturing labor costs, and manufacturing overhead costs) and one fixed- cost category (manuf

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Esquire Clothing is a manufacturer of designer suits.

The cost of each suit is the sum of three variable costs (direct material costs, direct manufacturing 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 2018, 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 2018 is 1,040.

Actual variable manufacturing costs in June 2018 were $52,164 for 1,080 suits started and completed.

Actual direct manufacturing labor-hours for June were 4,536.

There were no beginning or ending inventories of suits.

Solution.

REQUUIREMENTS:

1. Compute the flexible- budget variance, the spending variance, and the efficiency variance for variable manufacturing overhead.

Flexible-budget variance.

Spending Variance

Efficiency Variance for variable manufacturing overhead.

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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