Question

Concord, Ltd. manufactures shirts, which it sells to customers for embroidering with various slogans and emblems. The standard cost card for the shirts is as follows. Standard Price Standard Quantity Standard Cost Direct materials $4 per yard 1.50 yards $6.00 Direct labor $12 per DLH 0.50 DLH 6.00 Variable overhead $4 per DLH 0.50 DLH 2.00 Fixed overhead $6 per DLH 0.50 DLH 3.00 $17.00 Sandy Robison, operations manager, was reviewing the results for November when he became upset by the unfavorable variances he was seeing. In an attempt to understand what had happened, Sandy asked CFO Suzy Summers for more information. She provided the following overhead budgets, along with the actual results for November. The company purchased and used 80,600 yards of fabric during the month. Fabric purchases during the month were made at $3.90 per yard. The direct labor payroll ran $317,275, with an actual hourly rate of $12.25 per direct labor hour. The annual budgets were based on the production of 53,000 shirts, using 248,000 direct labor hours. Though the budget for November was based on 49,500 shirts, the company actually produced 51,500 shirts during the month. Variable Overhead Budget Annual Budget Per Shirt November—Actual Indirect material $454,000 $0.90 $49,300 Indirect labor 295,000 0.60 31,400 Equipment repair 201,000 0.40 20,100 Equipment power 49,500 0.10 7,100      Total $999,500 $2.00 $107,900 Fixed Overhead Budget Annual Budget November—Actual Supervisory salaries $265,000 $21,500 Insurance 348,000 27,600 Property taxes 85,000 6,900 Depreciation 325,000 26,000 Utilities 210,000 20,200 Quality inspection 276,000 24,600      Total $1,509,000 $126,800

(c) Calculate the variable overhead spending and efficiency variances for November. (Round answers to 0 decimal places, e.g. 125. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)

Answer 1

ANSWER

C)

Variable overhead spending variance	(Standard rate*Actual units)- - Actual variable Overhead cost
	(2*51500-107900)
	4,900	Unfavorable
Variable overhead Efficiency variance	(Standard Hour - Actual Hour)*Standard rate
	(51500 *0.5 - 317275/12.25)*4
	600	Unfavorable

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