Flandro Company uses a standard cost system and sets predetermined
Flandro Company uses a standard cost system and sets predetermined overhead rates on the basis of direct labor-hours. The following data are taken from the company’s budget for the current year:
The standard cost card for the company’s only product is given below:
During the year, the company produced 6,000 units of product and incurred the following costs:
Required:
- Prepare an analysis of the variances for direct materials and direct labor for the year.
- Prepare an analysis of the variances for variable overhead for the year.
Wonderful! Not only did our salespeople do a good job in meeting the sales budget this year, but our production people did a good job in controlling costs as well,” said Kim Clark, president of Martell Company. “Our $18,300 overall manufacturing cost variance is only 1.2% of the $1,536,000 standard cost of products made during the year. That’s well within the 3% parameter set by management for acceptable variances. It looks like everyone will be in line for a bonus this year.”
The company produces and sells a single product. The standard cost card for the product follows:
The following additional information is available for the year just completed:
- The company manufactured 30,000 units of product during the year.
- A total of 64,000 feet of material was purchased during the year at a cost of $8.55 per foot. All of this material was used to manufacture the 30,000 units. There were no beginning or ending inventories for the year.
- The company worked 43,500 direct labor-hours during the year at a direct labor cost of $15.80 per hour.
- Overhead is applied to products on the basis of standard direct labor-hours. Data relating to manufacturing overhead costs follow:
Required:
- Compute the materials price and quantity variances for the year.
- Compute the labor rate and efficiency variances for the year.
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