Problem - 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:
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Input
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Cost per Output Unit
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Direct materials
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3 lb. at $5 per lb.
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$15.00
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Direct manufacturing labor
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5 hrs. at $15 per hr.
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75.00
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Manufacturing overhead:
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Variable
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$6 per DLH
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30.00
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Fixed
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$8 per DLH
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40.00
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Standard manufacturing cost per output unit
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$160.00
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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:
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Direct materials purchased
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25,000 lb. at $5.20 per lb.
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Direct materials used
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23,100 lb.
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Direct manufacturing labor
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40,100 hrs. at $14.60 per hr
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Total actual manufacturing overhead (variable and fixed)
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$600,000
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Actual production
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7,800 output units
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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