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Question
Tiger, Inc. budgeted the following overhead costs for the current year assuming operations at 80% of capacity, or 40,000 units:| Total variable overhead "u00a6"u00a6"u00a6"u00a6"u00a6. | $240,000 |
| Total fixed overhead "u00a6"u00a6"u00a6"u00a6"u00a6"u00a6. | 560,000 |
| Total overhead "u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6. | $800,000 |
The standard cost per unit when operating at this same 80% capacity level is:
| Direct materials (5 lbs. @ $4/1b.) "u00a6"u00a6"u00a6"u00a6 | $20.00 |
| Direct labor (2 hrs. @ $8.75 hr.) "u00a6"u00a6"u00a6"u00a6. | 17.50 |
| Variable overhead (2 hrs. @ $3/hr.) "u00a6"u00a6"u00a6"u00a6 | 6.00 |
| Fixed overhead (2 hrs. @ $7/hr.) "u00a6"u00a6"u00a6"u00a6. | 14.00 |
| Total cost per unit "u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6. | $57.50 |
The actual production achieved in the current year was 60% of capacity, or 30,000 units. The actual costs were:
| Direct materials (150,350 lbs.) "u00a6"u00a6"u00a6"u00a6. | $616,435 |
| Direct labor (59,800 hrs.) "u00a6"u00a6"u00a6"u00a6"u00a6"u00a6. | 520,260 |
| Variable overhead "u00a6"u00a6"u00a6"u00a6."u00a6"u00a6"u00a6"u00a6"u00a6 | 192,000 |
| Fixed overhead "u00a6"u00a6"u00a6"u00a6."u00a6"u00a6"u00a6"u00a6."u00a6... | 552,000 |
Calculate the following variances and indicate whether each is favorable or unfavorable.
| Direct materials: | |
| Price variance | |
| Quantity variance | |
| Direct labor: | |
| Rate variance | |
| Efficiency variance | |
| Variable overhead: | |
| Spending variance | |
| Efficiency variance | |
| Fixed overhead: | |
| Spending variance | |
| Volume variance |
Answer
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