Principles of Accounting: P4 The Doormat Division of Clean Sweep Company produces all-vinyl mats

Principles of Accounting
P4. Direct Materials, Direct Labor, and Overhead Variances
The Doormat Division of Clean Sweep Company produces all-vinyl mats. Each doormat calls for 0.4 meter of vinyl material; the material should cost $3.10 per meter. Standard direct labor hours and labor cost per doormat are 0.2 hour and $1.84 (0.2 hour x $9.20 per hour), respectively. Currently, the division's standard variable overhead rate is $1.50 per direct labor hour, and its standard fixed overhead rate is $0.80 per direct labor hour.
In August, the division manufactured and sold 60,000 doormats. During the month, it used 25,200 meters of vinyl material; the total cost of the material was $73,080. The total actual overhead costs for August were $28,200, of which $18,200 was variable. The total number of direct labor hours worked was 10,800, and the factory payroll for direct labor for the month was $95,040. Budgeted fixed overhead for August was $9,280. Normal monthly capacity for the year was set at 58,00 doormats.

1. Compute for August the direct materials price variance, direct materials quantity variance, direct labor rate variance, direct labor efficiency variance, variable overhead spending variance, variable overhead efficiency variance, fixed overhead budget variance, and fixed overhead volume variance.
2. Business Application: Prepare a performance report based on your variance analysis, and suggest possible causes for each variance.
Powered by