Mancini manufactures embroidered jackets. The company prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a jacket isbased on static budget volume of 14,000 jackets per month: Direct materials (3.0 sq. ft @$4.00 per sq.ft) $12.00 Direct labor (2 hours @ $9.40 perhour) $18.80 Manufacturing overhead: Variable (2 hours @ $0.65perhour $1.30 Fixed (2 hours@ $2.20 perhour $4.40 $5.70 Total cost perjacket $36.50 Actual cost and production information: a. Actual production was 13,600 jackets. b. Actual direct materials usage was 2.8 square feet perjacket, at an actual price of $4.10 per square feet. c. Actual direct labor usage of 25,000 hours at a total costof $237,500. d. Total actual overhead cost was $79,000.
Requirements:
1. Compute the price and efficiency variances for direct materials and direct labor in dollars.
2. Journalize the usage of direct materials and the assignmentof direct labor, including the related variances.
3. For manufacturing overhead, compute the total variance, theflexible budget variance, and the production volume variance.(Hint: remember that the fixed overhead in the flexible budgetequals the fixed overhead in static budget.)
4. Mancini's management intentionally purchased superiormaterials for November production. How did this decision affect thecost variances? Overall, was the decision wise?