Opulence Clothing is a manufacturer of designer suits. The cost of each suit is the sum of three variable costs (direct materials costs, direct manufacturing labour costs, and manufacturing overhead costs) and one fixed-cost category (manufacturing overhead costs). Variable manufacturing overhead (VMOH) cost is allocated to each suit based on budgeted direct manufacturing labour-hours (DMLH) per suit. For June, each suit is budgeted to take 4 labour-hours. Budgeted VMOH costs per labour-hour is $15.00. The budgeted number of suits to be manufactured in June is 1,040. Actual VMOH costs in June were $63,840 for 1,100 suits started and completed. There was no beginning or ending inventory of suits. Actual DMLH for June were 4,560. Required 1. Calculate the flexible-budget variance, the rate variance, and the efficiency variance for VMOH. 2. Comment on the results. Requirement 1. Calculate the flexible-budget variance, the rate variance, and the efficiency variance for VMOH. Begin by computing the following amounts for the VMOH. (Round your answers to the nearest whole dollar.) Actual Costs Incurred 63840 Actual Input Quantity x Budgeted Rate 68400 Flexible Budget 66000 Now, compute the variances: flexible-budget variance, then rate variance, and finally the efficiency variance. Label each variance as favourable (F) or unfavourable (U). Flexible-budget variance Rate variance Efficiency variance Variance F/U Requirement 2. Comment on the results. Opulence had rate variance because the actual variable overhead rate per direct manufacturing labour-hour was than budgeted. It had efficiency variance because each suit averaged labour-hours than budgeted.
Opulence Clothing is a manufacturer of designer suits. The cost of each suit is the sum of three variable costs (direct materials costs, direct manufacturing labour costs, and manufacturing overhead costs) and one fixed-cost category (manufacturing overhead costs). Variable manufacturing overhead (VMOH) cost is allocated to each suit based on budgeted direct manufacturing labour-hours (DMLH) per suit. For June, each suit is budgeted to take 4 labour-hours. Budgeted VMOH costs per labour-hour is $15.00. The budgeted number of suits to be manufactured in June is 1,040. Actual VMOH costs in June were $63,840 for 1,100 suits started and completed. There was no beginning or ending inventory of suits. Actual DMLH for June were 4,560. Required 1. Calculate the flexible-budget variance, the rate variance, and the efficiency variance for VMOH. 2. Comment on the results. Requirement 1. Calculate the flexible-budget variance, the rate variance, and the efficiency variance for VMOH. Begin by computing the following amounts for the VMOH. (Round your answers to the nearest whole dollar.) Actual Costs Incurred 63840 Actual Input Quantity x Budgeted Rate 68400 Flexible Budget 66000 Now, compute the variances: flexible-budget variance, then rate variance, and finally the efficiency variance. Label each variance as favourable (F) or unfavourable (U). Flexible-budget variance Rate variance Efficiency variance Variance F/U Requirement 2. Comment on the results. Opulence had rate variance because the actual variable overhead rate per direct manufacturing labour-hour was than budgeted. It had efficiency variance because each suit averaged labour-hours than budgeted.
Chapter1: Financial Statements And Business Decisions
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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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Opulence Clothing is a manufacturer of designer suits. The cost of each suit is the sum of three variable costs (direct materials costs, direct manufacturing labour costs, and manufacturing
overhead costs) and one fixed-cost category (manufacturing overhead costs). Variable manufacturing overhead (VMOH) cost is allocated to each suit based on budgeted direct
manufacturing labour-hours (DMLH) per suit. For June, each suit is budgeted to take 4 labour-hours. Budgeted VMOH costs per labour-hour is $15.00. The budgeted number of suits to be manufactured
in June is 1,040. Actual VMOH costs in June were $63,840 for 1,100 suits started and completed. There was no beginning or ending inventory of suits. Actual DMLH for June were 4,560.
Required
1. Calculate the flexible-budget variance, the rate variance, and the efficiency variance for VMOH.
2. Comment on the results.
Requirement 1. Calculate the flexible-budget variance, the rate variance, and the efficiency variance for VMOH.
Begin by computing the following amounts for the VMOH. (Round your answers to the nearest whole dollar.)
Actual Costs
Incurred
63840
Actual Input
Quantity x
Budgeted Rate Flexible Budget
68400
66000
Now, compute the variances: flexible-budget variance, then rate variance, and finally the efficiency variance. Label each variance as favourable (F) or unfavourable (U).
Flexible-budget variance
Rate variance
Efficiency variance
Variance
F/U
Requirement 2. Comment on the results.
Opulence had
rate variance because the actual variable overhead rate per direct manufacturing labour-hour was
than budgeted. It had
efficiency variance
because each suit averaged
labour-hours than budgeted.
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