Chapter 23, Problem P23.27APGA

Computing standard cost variances and reporting to management Learning Objectives 3, 4, 5

1. DM Eff. Var. 5150F

Hear Smart manufactures headphone cases. During September 2018, the company produced and sold 105,000 cases and recorded the following cost data:

Standard Cost Information

	Quantity	Cost
Direct Materials	2 parts	$ 0.15 per part
Direct Labor	0.02 hours	8.00 per hour
Variable Manufacturing Overhead	0.02 hours	10.00 per hour

Fixed Manufacturing Overhead ($28,500 for static budget volume of 95,000 units and 1,900 hours, or $15 per hour)__________________________________________________________________
Actual Cost Information

Direct Materials	(209,000 parts @ $0.20 per part)	$41,800
Direct Labor	(1.600 hours @ $8.15 per hour)	13,040
Variable Manufacturing Overhead		9,000
Fixed Manufacturing Overhead		26,000

Requirements
1. Compute the cost and efficiency variances for direct materials and direct labor.
2. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances.
3. Hear Smart’s management used better quality materials during September. Discuss the trade-off between the two direct material variances.