Author Question: Brahma manufactures western hats. The company prepares flexible budgets and uses a standard cost ... (Read 34 times)

PhilipSeeMore · **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 20,000 hats per month:

Direct materials (2.5 m2 × $5.00 per m2)

$12.00

Direct labour (2 hours × $15 per hour)

30.00

Manufacturing overhead:

Variable (2 hours × $2.50 per hour)

$5.00

Fixed (2 hours × $3.75 per hour)

7.50

12.50

Total cost per hat

$54.50

Data for January of the current year include the following:

a.	Actual production was 18,000 hats.

b.	Actual direct materials purchased and used was 2.70 m2 per hat at an actual cost of $5.30 per

m2.

c.	Actual direct labour usage of 38,500 hours cost $539,000.

d.	Total actual overhead cost was $240,000.

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.

patma1981 · **Reply #1 on:** Jan 5, 2020

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