Bronfenbrenner Co. uses a standard cost system for its single product in which variable overhead is applied on the basis of direct labor hours. The following information is given:
Standard costs per unit:
Raw materials (2 grams at $16 per gram)……….
Direct labor (1 hour at $10 per hour)……………..
Variable overhead (1 hours at $2.5 per hour)…..
Actual experience for current year:
Units produced……………………………………………. 30,000 units
Purchases of raw materials (20,000 grams at $19 per gram)…………………………………………..
Raw materials used……………………………………… 35,000 grams
Direct labor (18,000 hours at $10 per hour)…….
Variable overhead cost incurred…………………….$50,000
Required:
1. Show all calculations in good form. Answers without supporting calculations will earn zero marks.
2. Compute the following variances for raw materials, direct labor, and variable overhead, assuming that the price variance for materials is recognized at point of purchase:
a. Direct materials price variance.
b. Direct materials quantity variance.
c. Direct labor rate variance.
d. Direct labor efficiency variance.
e. Variable overhead spending variance.
f. Variable overhead efficiency variance.
g. As a manager, why is variance analysis important?
