Hear Smart manufactures headphone cases. During September 2018, the company produced and sold 105,000 cases and recorded the following cost data: STANDARD COST INFORMATION                                            QUANTITY                                    COST Direct Materials                2 Parts                                       $0.15 per part Direct Labor                      0.02 hours                                  8.00 per hour Variable Manufacturing Overhead 0.02 hours                  10 per hour Fixed Manufacturing Overhead ($28,500 for static budget volume of 95,000 units and 1,900 hours, or $15 per hour) ACTUAL COST INFORMATION Direct Materials (209,000 parts @ $0.20 per part) $ 41,800 Direct Labor (1,600 hours @ $8.15 per hour) 13,040 Variable Manufacturing Overhead 9,000 Fixed Manufacturing Overhead 26,000 REQUIREMENTS Compute the cost and efficiency variances for direct materials and direct labor. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances. Hear Smart's management used better quality materials during September. Discuss the trade-off between the two direct material variances.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Hear Smart manufactures headphone cases. During September 2018, the company produced and sold 105,000 cases and recorded the following cost data:

STANDARD COST INFORMATION

                                           QUANTITY                                    COST

Direct Materials                2 Parts                                       $0.15 per part

Direct Labor                      0.02 hours                                  8.00 per hour

Variable Manufacturing Overhead 0.02 hours                  10 per hour

Fixed Manufacturing Overhead ($28,500 for static budget volume of 95,000 units and 1,900 hours, or $15 per hour)

ACTUAL COST INFORMATION

Direct Materials (209,000 parts @ $0.20 per part) $ 41,800

Direct Labor (1,600 hours @ $8.15 per hour) 13,040

Variable Manufacturing Overhead 9,000

Fixed Manufacturing Overhead 26,000

REQUIREMENTS

  1. Compute the cost and efficiency variances for direct materials and direct labor.
  2. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances.
  3. Hear Smart's management used better quality materials during September. Discuss the trade-off between the two direct material variances.
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