The Beal Manufacturing Company’s costing system has two direct-cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct manufacturing laborhours (DLH). At the beginning of 2012, Beal adopted the following standards for its manufacturing costs:
Input Cost per Output Unit
Direct materials 3 lb. at $5 per lb $15.00
Direct manufacturing labor 5 hrs. at $15 per lb 75.00
Manufacturing overhead:
Variable $6 per DLH 30.00 $6 per DLH 30.00
Fixed $8 per DLH ƒƒ40.00 $8 per DLH 40.00
Standard manufacturing cost per output unit $160.00
The denominator level for total manufacturing overhead per month in 2012 is 40,000 direct manufacturing labor-hours. Beal’s flexible budget for January 2012 was based on this denominator level. The records for January indicated the following:
Direct materials purchased 25,000 lb. at $5.20 per lb.
Direct materials used 23,100 lb.
Direct manufacturing labor 40,100 hrs. at $14.60 per hr.
Total actual manufacturing overhead (variable and fixed) $600,000
Actual production 7,800 output units
1. Prepare a schedule of total standard manufacturing costs for the 7,800 output units in January 2012.
2. For the month of January 2012, compute the following variances, indicating whether each is favorable (F) or unfavorable (U):
a. Direct materials price variance, based on purchases
b. Direct materials efficiency variance
c. Direct manufacturing labor price variance
d. Direct manufacturing labor efficiency variance
e. Total manufacturing overhead spending variance
f. Variable manufacturing overhead efficiency variance
g. Production-volume variance