Question

Flagstaff, Inc. uses standard costing for its one product, baseball bats. The standards call for 3 board-feet of wood at $1.40 per board-foot, and 45 minutes of work at $12 per hour per bat. Total manufacturing overhead costs were estimated at $9,450, of which the variable portion was $0.50 per bat and the fixed portion was $1.00 per bat with an estimate of 6,300 bats to be produced. Flagstaff identifies price variances at the earliest possible point in time.During March, the company had the following results:Direct labor used = 4,800 hours at a cost of $56,400Actual manufacturing overhead fixed costs = $6,000Actual manufacturing overhead variable costs = $3,100Bats produced = 6,000Instructions
Compute the following variances for March.
1. Labor quantity variance
2. Total labor variance
3. Overhead controllable variance
4. Overhead volume variance

Answer 1

Answer:

1. $3,600 (Favorable)

2.$2,400 (Favorable)

3. $200 (Favorable)

4. $299 (Unfavorable)

Explanation:

1. Labor quantity variance = (Actual hours * Standard rate) - ( Standard hours * Standard rate)

= (4,800* $12) - {(3/4 * 6,000) * $12)

= $57,600 - $54,000

= $3,600 (Favorable)

2. Total labor variance = (Actual hours * Actual rate) - (Standard hours * Standard rate)

= (4,800 * $11.75) - {(3/4 * 6,000) * $12}

= $56,400 -  $54,000

= $2,400 (Favorable)

3. Overhead controllable variance = Actual overhead - Overhead budgeted

= ($3,100 + $6,000) - {($0.50 * 6,000) +  $6,300}

=$9,100 - $9,300

= $200 (Favorable)

4. Overhead volume variance = (Normal hours - Standard hours) * Fixed overhead rate

= {(6,300 * 3/4) - 4,500} * ($1.00 + 3/4)

= 225 * $1.33

= $299.25 (Unfavorable)