E8-16 | |||||
Variable manufacturing overhead, Variance analysis. | |||||
Esquire Clothing is a manufacturer of designer suits. The cost of each suit is the sum of three variable costs (direct material costs, direct manufacturing labor costs, and manufacturing overhead costs) and one fixed – cost category (manufacturing overhead costs.) Variable manufacturing overhead cost is allocated to each suiton the basis of budgeted direct manufacturing labor hours per suit. | |||||
For June 2014, each suit is budgeted to take 4 labor hours. Budgeted variable manufacturing overhead cost per labor hour is $12. The budgeted number of suits to be manufactured in June 2014 is 1,040. | |||||
Actual Variable manufacturing costs in June 2014 were $52,164 for 1,080 suits startedand completed. There were no beginning or ending inventories of suits. Actual direct manufacturing labor hours for June were 4,536. | |||||
1. Compute the flexible -budget variance, the spending variance, and the efficiency variance for variable manufacturing overhead. | |||||
2. Comments on the results. |
E8-17 | ||||||
Fixed manufacturing overhead, varihead, variance analysis (Continuation of 8-16). | ||||||
Esquire clothing allocates fixed manufacturing overhead to each suit using budgeted direct manufacturing labor hours per suit. Data pertaining to fixed manufacturing overhead costs for June 2014 are budgeted $62,400 and actual $63,916. | ||||||
1. Compute the spending variance for fixed manufacturing overhead. Comment on the results. | ||||||
2. Compute the production-volume for June 2014. What interference can Esquire Clothing draw from this variance. |