Bullseye Company manufactures dartboards. Its standard cost
information follows:
| Standard Quantity | Standard Price (Rate) | Standard Unit Cost | ||||||
| Direct materials (cork board) | 3.50 | sq. ft. | $ | 2.40 | per sq. ft. | $ | 8.40 | |
| Direct labor | 1 | hrs. | $ | 11.00 | per hr. | 11.00 | ||
| Variable manufacturing overhead (based on direct labor hours) | 1 | hrs. | $ | 0.65 | per hr. | 0.65 | ||
| Fixed manufacturing overhead ($58,500 ÷ 130,000 units) | 0.45 | |||||||
Bullseye has the following actual results for the month of
September:
| Number of units produced and sold | 110,000 | |
| Number of square feet of corkboard used | 400,000 | |
| Cost of corkboard used | $ | 1,000,000 |
| Number of labor hours worked | 125,000 | |
| Direct labor cost | $ | 1,262,500 |
| Variable overhead cost | $ | 72,000 |
| Fixed overhead cost | $ | 54,000 |
Required:
1. Calculate the direct materials price, quantity, and
total spending variances for Bullseye. (Do not round your
intermediate calculations. Indicate the effect of each variance by
selecting "F" for favorable, "U" for unfavorable.)
2. Calculate the direct labor rate, efficiency,
and total spending variances for Bullseye.(Do not round
your intermediate calculations. Indicate the effect of each
variance by selecting "F" for favorable, "U" for
unfavorable.)
3. Calculate the variable overhead rate, efficiency, and total spending variances for Bullseye. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable/Overapplied and "U" for unfavorable/underapplied.)
1. Actual cost of cork board = 1000000/400000 = $2.50
. Direct materials price vaariance = (2.40-2.50)*400000 = $40,000 U
Direct material quantity variance = (385000-400000)*2.40 = $36,000 U
Total spending variance = $40000+$36000 = $ 76,000 U
2.Actuallabour rate per hour = 1262500/125000 = $10.1
Labour rate variance = (11-10.1)*125000 = $1,12,500 F
Labour Efficiency variance = (110000-125000)*11 = $1,65,000 U
Total Spending variance = $112500F+$165000U =$52,500 U
3. Actual variable overhead cost perhour = 72000/125000 = $.576 per hour
Variable overhead rate variance = (.65-576)*125000 = $9,250F
Variable overhead efficiency variance = (125000- 110000)*.65 = $9,750 U
Total spending variance = $9250F + $9750U = $500 U
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