The costs incurred were as follows: $ 875,000 $ 758,500 Fixed manufacturing costs Fabric costs (370,000 yards bought and used) Direct manufacturing labor costs (100,000 hours) $1,260,000 1. Compute the following variances for 2017, and indicate whether each is favorable (F) or unfavorable (U): a. Direct materials efficiency variance b. Direct materials price variance c. Direct manufacturing labor efficiency variance d. Direct manufacturing labor price variance e. Fixed overhead flexible-budget variance f. Fixed overhead production-volume variance 2. Compute Greenspace Company's gross margin for its first year of operation. Required
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.
Direct-cost and
In 2017, Greenspace expected to make and sell 160,000 backpacks; each was budgeted to use 2 yards of fabric and require 0.5 hours of direct labor work. The company expected to pay $2 per yard for fabric and compensate workers at an hourly wage of $12. Greenspace has no variable overhead costs, but budgeted $800,000 for fixed manufacturing overhead in 2017.
In 2017, Greenspace actually made 180,000 backpacks and sold 144,000 of them for a total revenue of 2592000
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