The Emerson Division of Golding Company produces small kitchen appliances. The company uses a standard cost system for production costing and control. The standard cost sheet for its most popular product, a toaster, is given below:
Direct materials (2.5 lbs. @ $4.00) $10.00
Direct labor (0.7 hrs. @ $10.50) 7.35
Variable overhead (0.7 hr. @ $6.00) 4.20
During the year Emerson experienced the following activity relative to the production of its toasters:
a. Production of toasters totaled 50,000 units.
b. A total of 130,000 pounds of raw materials was purchased at $3.70 per pound.
c. There were 10,000 pounds of raw materials in beginning inventory (carried at $4 per pound). There was no ending inventory.
d. The company used 36,500 direct labor hours at a total cost of $392,375.
e. Actual variable overhead totaled $210,000.
Emerson produces all of its toasters in a single plant. Normal activity (capacity) is 45,000 units per year. Standard overhead rates are computed based on normal activity measured in standard direct labor hours.
Required:
(a) Compute price and usage variances for materials.
(b) Compute the labor rate and labor efficiency variances.
(c) Compute the variable overhead spending and efficiency variances.