Premium Fender, which uses a standard cost system, manufactured 20,000 boat fenders during 2016, using 141,000 square feet of extruded vinyl purchased at $1.35 per square foot. Production required 470 direct labor hours that cost $16.00 per hour. The direct materials standard was seven square feet of vinyl per fender, at a standard cost of $1.40 per square foot. The labor standard was 0.028 direct labor hour per fender, at a standard cost of $15.00 per hour. Compute the cost and efficiency variances for direct materials and direct labor. Does the pattern of variances suggest Premium Fender's managers have been making trade-offs? Explain. Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity.) Direct materials cost variance = Direct labor cost variance = Formula Variance

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Premium Fender, which uses a standard cost system, manufactured 20,000 boat fenders during 2016, using 141,000 square feet of extruded vinyl purchased at $1.35 per square foot. Production
required 470 direct labor hours that cost $16.00 per hour. The direct materials standard was seven square feet of vinyl per fender, at a standard cost of $1.40 per square foot. The labor standard was
0.028 direct labor hour per fender, at a standard cost of $15.00 per hour.
Compute the cost and efficiency variances for direct materials and direct labor. Does the pattern of variances suggest Premium Fender's managers have been making trade-offs? Explain.
Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U).
(Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity.)
Direct materials cost variance
=
Direct labor cost variance
=
Formula
Variance
Transcribed Image Text:Premium Fender, which uses a standard cost system, manufactured 20,000 boat fenders during 2016, using 141,000 square feet of extruded vinyl purchased at $1.35 per square foot. Production required 470 direct labor hours that cost $16.00 per hour. The direct materials standard was seven square feet of vinyl per fender, at a standard cost of $1.40 per square foot. The labor standard was 0.028 direct labor hour per fender, at a standard cost of $15.00 per hour. Compute the cost and efficiency variances for direct materials and direct labor. Does the pattern of variances suggest Premium Fender's managers have been making trade-offs? Explain. Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity.) Direct materials cost variance = Direct labor cost variance = Formula Variance
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