# Managerial Accounting: P21-6A Kudos Company has set the following standard costs per unit

Managerial Accounting

Problem 21-6A Materials, labor, and overhead variances, and overhead variance report
Kudos Company has set the following standard costs per unit for the product it manufactures.
Direct materials (10 lbs @ \$3 per lb.) 30.00
Direct labor (4 hrs @ \$ per hr.) 24.00
Overhead (4 hrs @ \$2.50 per hr.) 10.00
Total standard cost \$ 64.00

The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 10,000 units per month. The following flexible budget information is available:
Operating Levels 70% 80% 90%
Production in units 7,000 8,000 9,000
Standard direct labor hours 28,000 32,000 36,000
Budgeted overhead
Variable overhead costs
Indirect materials 8,750 10,000 11,250
Indirect labor 14,000 16,000 18,000
Power 3,500 4,000 4,500
Maintenance 1,750 2,000 2,250
Total variable costs 28,000 32,000 36,000
Fixed overhead costs
Rent of factory building 12,000 12,000 12,000
Depreciation - machinery 20,000 20,000 20,000
Supervisory salaries 16,000 16,000 16,000
Total fixed costs 48,000 48,000 48,000
Total overhead costs 76,000 80,000 84,000
May, the company operated at 90% of capacity and produced 9,000 units, incurring the following actual costs
Direct materials (92,000 lbs @ \$2.95 per lb) \$ 271,400
Direct labor (37,600 hrs @ \$6.05 per hr) 227,480
Overhead costs
Indirect materials \$ 10,000
Indirect labor 16,000
Power 4,500
Maintenance 3,000
Rent of factory building 12,000
Depreciation - machinery 19,200
Supervisory salaries 17,000 81,700
Total costs \$ 580,580

Required
1. Compute the direct materials variance, including its prince and quantity variances
2. Computer the direct labor variance, including its rate and efficiency variances
3. Computer these variances (a) variable overhead spending and efficiency, (b) fixed overhead spending and volume, and C. total overhead controllable.
4. Prepare a detailed overhead variance report that shows the variances for individual items of overhead.