Fremont, Inc

question 4

Essay

Fremont, Inc., builds storage boxes to custom order. Materials include 20 board feet of lumber at $1.25/board foot. Standards call for 2 hours of labor at $15 per hour.
During March, 4,200 boxes were built. Materials purchased totaled $103,890 for 86,300 board feet of lumber. Actual lumber usage in production was 82,310 board feet. The March payroll was $139,360 for 9,150 hours.
Required:
(Be sure to indicate whether the variance is favorable or unfavorable.)
a. Compute the direct material price variance.
b. Compute the direct material efficiency variance.
c. Compute the direct labor rate variance.
d. Compute the direct labor efficiency variance.

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Definitions:

Accounts Payable

Accounts Payable is the amount of money a company owes its suppliers for goods or services received but not yet paid for.

Basic Earning Power Ratio

A financial ratio that shows how effectively assets are being used to generate earnings before the influence of taxes and financing costs.

Times-Interest-Earned Ratio

A measure of a company's ability to honor its debt payments, calculated by dividing earnings before interest and taxes (EBIT) by interest expenses.

Equity Multiplier

A ratio of financial leverage that calculates the proportion of a company's assets funded by its shareholders' equity.