Homework: HW #10 - Chapter 11
Ceramics Etc. is a manufacturer of large flowerpots for urban settings. The company has these standards:
Ceramics Etc. allocated fixed manufacturing overhead to production based on standard direct labor hours. Last month, the company reported the following actual results for the production of 1,000 flowerpots:
Requirement 1. Compute the direct material price variance and the direct material quantity variance. (Enter the variances as positive numbers. Round the variance amount to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U) in the input field after the amount you enter.)
First determine the formula for the price variance, then compute the price variance for direct materials.
Standards
Direct materials (resin) 11 pounds per pot at a cost of $4.00 per pound
Direct labor 3.0 hours at a cost of $19.00 per hour
Standard variable manufacturing overhead rate $5.00 per direct labor hour
Budgeted fixed manufacturing overhead $29,000
Standard fixed MOH rate $11.00 per direct labor hour (DLH)
Actual Results
Direct materials Purchased 12,000 pounds at a cost of $4.10 per pound; used 11,200 pounds to produce 1,000 pots
Direct labor Worked 3.5 hours per flowerpot (3,500 total DLH) at a cost of $17.00 per hour
Actual variable manufacturing overhead $5.40 per direct labor hour for total actual variable manufacturing overhead of $18,900
Actual fixed manufacturing overhead $28,400
Standard fixed manufacturing overhead allocated based on actual production $33,000
Requirements
1. Compute the direct material price variance and the direct material quantity variance.
2. Who is generally responsible for each variance?
3. Interpret the variances.
