Smart Sound manufacturers headphone cases. During September 2011, the company produced 105,000
Cases and recorded the following data:
Standard Cost Information:
Quantity Price
Direct materials 2 parts 0.15 per part
Direct labor 0.02 hours 9.00 per hour
Variable manufacturing overhead 0.02 hours 9.00 per hour
Fixed manufacturing overhead ($28,500 for static budget volume of 95,000 units and 1,900 hours, or $ 15 per hour)
Actual Information:
Direct materials (235,000 parts @ $0.20 per part= $47,000
Direct labor (1,700 hours @ $9.15 per hour=$15,555
Manufacturing overhead $61,000
Requirements
1. Compute the price variance and efficiently variance for direct materials and for direct labor.
2. For manufacturing overhead, compute the total variance, the flexible budget variance, and the production volume variance.
3. Prepare a standard cost income statement through gross profit to report all variances to management.
Sale price of the headset cases was $1.50 each.
4. Smart Sound's management used more-expensive workers during September. Explain the trade-off between the two direct labor variances.