Question

The Mitchell Frock Company manufactures women's clothing. Work in Process is charged with standard manufacturing costs, including both variable and fixed factory overhead.

The Kismet nightgown is the sole product of the sheer department and is produced in standard lots which contain 125 units.

The relevant standards and budgets are as follows:

Raw Materials:

Silk: 500 metres per lot @ $3.60 per metre

Lace:                       360 metres per lot @ $5.50 per metre

Direct Labor: 60 hours per lot @ $3.50 per hour.

Budgeted Overhead:        $1.50 variable per hour plus $12,000 fixed per month

Normal volume is budgeted at 50 lots of production per month.

All overhead is applied on a direct labor hourly basis.

The actual operations and costs in the sheet department for the month of March, are summarized below:

Purchases of Materials:

Silk:                        30,000 metres @ $3.50 per metre

Lace:                       20,000 metres @ $5.75 per metre

Usage of Materials:

Silk:                        26,850 metres

Lace:                       22,280 metres

                        Direct Labor: 3,500 hours @ $3.66 per hour.

Overhead:

Variable:                 $ 5,450

Fixed:                     $12,750

Output:            56 lots of Kismet nightgowns

Required:

Compute the requested variances from a standard cost for the month of March.

Flag question: Spacer

FORMULAS:

            MPV        =     (SP - AP) x AQ

MEV = (SQ - AQ) x SP

   LRV =     (SR - AR) x AQ

LEV =    (SQ - AQ) x SR

VOHSV          =          (AQ x SR) -   Actual Cost            

            VOHEV          =          (SQ x SR) - (AQ x SR)

                                                “Allocated”

             

            Spending or Rate

            FOHSV           = Budgeted FOH - Actual Cost      

  

“Allocated”            Budgeted FOH

            FOHPVV =     (SQ x SR) - [Denom x SR]

            (or Denom) allowed

The fixed overhead (spending) rate variance is …

Group of answer choices

1,440 U

310 U

520 U

750 U

0

Flag question: Question 28

Question 281 pts

The variable overhead (spending) rate variance is …

Group of answer choices

750 U

500 U

200 U

210 U

360 U

Answer 1

fixed overhead (spending) rate variance = Budgeted FOH - Actual Cost

                                                                 =$12,000 -$12,750

                                                                 =$750 (U)

 

variable overhead (spending) rate variance = (AQ x SR) -   Actual Cost  

                                                                     =  (3,500 hours x$1.50 per hour) - $5,450

                                                                      =$5,250- $5,450

                                                                      = $200 (U)