Rudd Clothiers is a small company that manufactures tall-men's suits. The company has used a standard cost accounting system. In May 2017, 10,400 suits were produced. The following standard and actual cost data applied to the month of May when normal capacity was 14,000 direct labor hours. All materials purchased were used. Cost Element Direct materials. Direct labor Overhead Standard (per unit) 6 yards at $4.50 per yard 1.41 hours at $13.80 per hour 1.41 hours at $7.30 per hour (fixed $4.90; variable $2.40) Actual $276,760 for 62,900 yards ($4.40 per yard) $219,589 for 15,464 hours ($14.20 per hour) $48,800 fixed overhead $36,500 variable overhead Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $68,600, and budgeted variable overhead was $33,600. Compute the overhead controllable variance and the overhead volume variance.
Rudd Clothiers is a small company that manufactures tall-men's suits. The company has used a standard cost accounting system. In May 2017, 10,400 suits were produced. The following standard and actual cost data applied to the month of May when normal capacity was 14,000 direct labor hours. All materials purchased were used. Cost Element Direct materials. Direct labor Overhead Standard (per unit) 6 yards at $4.50 per yard 1.41 hours at $13.80 per hour 1.41 hours at $7.30 per hour (fixed $4.90; variable $2.40) Actual $276,760 for 62,900 yards ($4.40 per yard) $219,589 for 15,464 hours ($14.20 per hour) $48,800 fixed overhead $36,500 variable overhead Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $68,600, and budgeted variable overhead was $33,600. Compute the overhead controllable variance and the overhead volume variance.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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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Transcribed Image Text:Rudd Clothiers is a small company that manufactures tall-men's suits. The company has used a standard cost accounting
system. In May 2017, 10,400 suits were produced. The following standard and actual cost data applied to the month of
May when normal capacity was 14,000 direct labor hours. All materials purchased were used.
Cost
Element
Direct
materials
Direct labor
Overhead
Standard (per unit)
6 yards at $4.50 per yard
1.41 hours at $13.80 per hour
1.41 hours at $7.30 per hour (fixed $4.90;
variable $2.40)
Actual
$276,760 for 62,900 yards ($4.40 per
yard)
$219,589 for 15,464 hours ($14.20 per
hour)
$48,800 fixed overhead $36,500
variable overhead
Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $68,600,
and budgeted variable overhead was $33,600.
Compute the overhead controllable variance and the overhead volume variance.
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