Author Question: Brahma manufactures western hats. The company prepares flexible budgets and uses a standard cost ... (Read 56 times)

Chelseaamend · **on:** Jan 5, 2020

Brahma manufactures western hats. The company prepares flexible budgets and uses a standard cost system to control manufacturing costs. The following standard unit cost of a hat is based on the static budget volume of 14,000 hats per month:

Direct materials (3.0 m2 × $6.00 per m2)

$18.00

Direct labour (2 hours × $12 per hour)

24.00

Manufacturing overhead:

Variable (2 hours × $1.25 per hour)

$2.50

Fixed (2 hours × $2.75 per hour)

5.50

8.00

Total cost per hat.

$50.00

Data for January of the current year include the following:

a.	Actual production was 13,600 hats.

b.	Actual direct materials purchased and used was 2.70 m2 per hat at an actual cost of $6.30 per

m2.

c.	Actual direct labour usage of 27,500 hours cost $385,000.

d.	Total actual overhead cost was $110,500.

Required:

1.	Compute the price and efficiency variances for direct materials and direct labour.

2.	For manufacturing overhead, compute the total variance, the flexible budget variance, and the

production volume variance.

cassie_ragen · **Reply #1 on:** Jan 5, 2020

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