Problem:
Dillard, Inc. has developed the following standard cost data based on 60,000 direct labor hours, which is 75% of the firm's capacity. Fixed overhead is $360,000 and variable overhead is $180,000 at this level of activity.
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Direct material (3 lbs. @ $2.00/lb.)
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$ 6.00
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Direct labor (0.5 hrs. @ $8.00/hr.)
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4.00
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Factory overhead (0.5 hrs. @ $9.00/hr.)
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4.50
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Total standard cost per unit
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$14.50
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During the last period, the company actually spent 62,000 direct labor-hours to produce 128,000 units and incurred the following manufacturing costs:
Actual cost incurred
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|
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Direct material (380,000 lbs.)
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$779,000
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Direct labor (62,000 hrs.)
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507,150
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Fixed overhead
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365,000
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Variable overhead
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220,000
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Required:
Q1. Determine all variances for direct materials, direct labor, and factory overheads. Use the 4-variance method for factory overheads.
Q2. What are possible causes of each of the variances?