Maria Ann, Inc. designs and manufactures fleece quarter-zip jackets. It sells its jackets to brand-name outdoor outfitters in lots of one dozen. Maria Ann's May 2017 static budget and actual results for direct inputs are as follows: E (Click the icon to view the data.) A (Click the icon to view additional information.) Read the ceguirements Requirement 1. Calculate the direct materials and direct manufacturing labor price and efficiency variances in May 2017. What is the total flexible-budget variance for both inputs (direct materials and direct manufacturing labor) combined? What percentage is this variance of the total cost of direct materials and direct manufacturing labor in the flexible budget? Begin by calculating the direct materials and direct manufacturing labor price and efficiency variances in May 2017. Complete the actual results, price variance, and cost columns, then the efficiency variance and flexible budget columns. Label each variance as favorable or unfavorable. (Round all answers to the nearest cent.) Actual Price Actual Input Qty x May 2017 Results Variance Budgeted Price Requirements Units Direct materials Data Table 1. Calculate the direct materials and direct manufacturing labor price and efficiency variances in May 2017. What is the total flexible-budget variance for both inputs (direct materials and direct manufacturing labor) combined? What percentage is this variance of the total cost of direct materials and direct manufacturing labor in the flexible budget? 2. Comment on the May 2017 results. Would you continue the "experiment" of using the new material? Direct labor Total variance Static Budget Number of jacket lots (1 lot = 1 dozen) 400 Per Lot of Jackets: Direct materials 13 yards at $1.70 per yard = $22.10 Direct manufacturing labor 1.8 hours at $8.30 per hour = $14.94 Print Done Actual Results Number of jacket lots sold 425 Total Direct Inputs: Direct materials 6,375 yards at $1.90 per yard = $12,112.50 Direct manufacturing labor 680 hours at $8.40 per hour = $5,712.00
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.
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The production manager discusses the sources of the variances: "A new type of material was purchased in May. This led to faster cutting and sewing, but the workers used more material than usual as they learned to work with it. For now, the standards are fine."
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