Input 0.3 lb. @ $10/lb. Cost/Doorknob $ 3.00 Direct materials (brass) Direct manufacturing labor Manufacturing overhead: Variable 1.2 hours @ $17/hour 20.40 $5/lb. x 0.3 lb. 1.50 Fixed 4.50 $15/lb. X 0.3 lb. Standard cost per doorknob $29.40 29,000 doorknobs Production 12,400 lb. at $11/lb. Direct materials purchased Direct materials used 8,500 lbs. Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead 29,200 hours for $671,600 $ 65,100 $158,000 1. For the month of April, compute the following variances, indicating whether each is favorable (F) or unfavorable (U): a. Direct materials price variance (based on purchases) b. Direct materials efficiency variance c. Direct manufacturing labor price variance d. Direct manufacturing labor efficiency variance e. Variable manufacturing overhead spending variance f. Variable manufacturing overhead efficiency variance g. Production-volume variance h. Fixed manufacturing overhead spending variance 2. Can Williams use any of the variances to help explain any of the other variances? Give examples. Required

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Flexible-budget variances, review of Chapters 7 and 8. Eric Williams is a cost accountant and business analyst for Diamond Design Company (DDC), which manufactures expensive brass doorknobs. DDC uses two direct-cost categories: direct materials and direct manufacturing labor. Williams feels that manufacturing overhead is most closely related to material usage. Therefore, DDC allocates manufacturing overhead to production based upon pounds of materials used.

At the beginning of 2017, DDC budgeted annual production of 420,000 doorknobs and adopted the following standards for each doorknob:

Input
0.3 lb. @ $10/lb.
Cost/Doorknob
$ 3.00
Direct materials (brass)
Direct manufacturing labor
Manufacturing overhead:
Variable
1.2 hours @ $17/hour
20.40
$5/lb. x 0.3 lb.
1.50
Fixed
4.50
$15/lb. X 0.3 lb.
Standard cost per doorknob
$29.40
Transcribed Image Text:Input 0.3 lb. @ $10/lb. Cost/Doorknob $ 3.00 Direct materials (brass) Direct manufacturing labor Manufacturing overhead: Variable 1.2 hours @ $17/hour 20.40 $5/lb. x 0.3 lb. 1.50 Fixed 4.50 $15/lb. X 0.3 lb. Standard cost per doorknob $29.40
29,000 doorknobs
Production
12,400 lb. at $11/lb.
Direct materials purchased
Direct materials used
8,500 lbs.
Direct manufacturing labor
Variable manufacturing overhead
Fixed manufacturing overhead
29,200 hours for $671,600
$ 65,100
$158,000
1. For the month of April, compute the following variances, indicating whether each is favorable (F) or
unfavorable (U):
a. Direct materials price variance (based on purchases)
b. Direct materials efficiency variance
c. Direct manufacturing labor price variance
d. Direct manufacturing labor efficiency variance
e. Variable manufacturing overhead spending variance
f. Variable manufacturing overhead efficiency variance
g. Production-volume variance
h. Fixed manufacturing overhead spending variance
2. Can Williams use any of the variances to help explain any of the other variances? Give examples.
Required
Transcribed Image Text:29,000 doorknobs Production 12,400 lb. at $11/lb. Direct materials purchased Direct materials used 8,500 lbs. Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead 29,200 hours for $671,600 $ 65,100 $158,000 1. For the month of April, compute the following variances, indicating whether each is favorable (F) or unfavorable (U): a. Direct materials price variance (based on purchases) b. Direct materials efficiency variance c. Direct manufacturing labor price variance d. Direct manufacturing labor efficiency variance e. Variable manufacturing overhead spending variance f. Variable manufacturing overhead efficiency variance g. Production-volume variance h. Fixed manufacturing overhead spending variance 2. Can Williams use any of the variances to help explain any of the other variances? Give examples. Required
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