Questions -
1. Wallis car wash Inc. expected to wash 2000 cars during the month of August. Washing each car was expected to require 0.2 hours of labor. The company actually used 420 hours of labor to wash 1880 cars. The labor usage variance was $704 unfavorable.
- Determine the labor price.
- If the actual labor rate is $14, indicate whether the labor price variance would be favorable (F) or unfavorable (U)
2. Strauss Company established a predetermined variable overhead cost rate at $10.50 per direct labor hour. The actual variable overhead cost rate was $9.60 per hour. The planned level of labor activity 76,000 hours of labor. The company actually used 80,000 hours of labor.
- Determine the total flexible budget variable overhead cost variance
- Like many companies, Strauss has decided not to separate the total variable overhead cost variance into price and usage components. Explain why Strauss made this choice.
3. Lynch Company established a predetermined fixed overhead cost rate of $58 per unit of product. The company planned to make 7,000 units of product but actually produced only $6500 units. Actual fixed overhead costs were $424,000
- Determine the fixed cost spending variance and indicate whether it is favorable or unfavorable. Explain what this variance means. Identify the manager who is (are) responsible for the variance.
- Determine the fixed cost volume variance and indicate whether it is favorable or unfavorable. Explain why this variance is important. Identify the manager(s) who is (are) responsible for the variance.