Question:
Materials, labor, and overhead variances-two-variance method
Fargo Company manufactures products in batches of 100 units per batch. The company uses a standard cost system and prepares budgets that call for 500 of these batches per period. Fixed overhead is $60,000 per period. The standard costs per batch follow:
|
Material (80 gallons)
|
$32
|
|
Labor (60 hours)
|
480
|
|
Factory overhead
|
252
|
|
Standard cost per batch
|
$764
|
During the period, 503 batches were manufactured, and the following costs were incurred:
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Materials used (40,743 gallons)
|
$15,482.34
|
|
Labor (29,677 hours at $865 per hour)
|
256,706.05
|
|
Actual variable overhead
|
67,080.00
|
|
Actual fixed overhead
|
60,500.00
|
Required:
Calculate the variances for materials, labor, and overhead. For overhead, use the two-variance method.