Question:
Comprehensive Variance Problem
Trenton Manufacturing Company manufactures one product, with a standard cost detailed as follows:
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Direct materials, 20 yards at $6 per yard
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$120
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Direct labor, 25 hours at $5 per hour
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125
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Factory overhead applied at 80% of
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direct labor (variable costs = $75; fixed costs = $25)
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100
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Variable selling and administrative
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80
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Fixed selling and administrative
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50
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Total unit costs
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$475
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Standards have been computed based on a master budget activity level of 14,400 direct labor-hours per month. Actual activity for the past month was as follows:
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Materials used
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9,500 yards at $6.15 per yard
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Direct labor
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12,600 hours at $5.10 per hour
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Total factory overhead
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$55,500
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Production
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500 units
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Required
Prepare variance analyses for the variable and fixed costs. Indicate which variances cannot be computed. Materials are purchased as they are used.