Krane Company Has a Standard Costing System and Keeps All

question 113

Essay

Krane Company has a standard costing system and keeps all its costs up to date.The company's main product is beach towels which are made in a single department.The standard variable costs for one beach towel (unit)are as follows:
$\begin{array}{ll}\text { Price difference: }&\text { Standard price } & \$ 1.00 \text { per yard } \\&\text { Less actual price } & \underline{0.99} \text { per yard } \\&\text { Difference } & \$ 0.01\text { (F) } \\\end{array}$

$\text { Direct materials price variance: }$
$\begin{array}{l}=(\text { Standard Price }- \text { Actual Price }) \times \text { Actual Quantity } \\=\$ 0.01(\mathrm{~F}) \times 66,250 \mathrm{yd} \\=\$ 662.50(\mathrm{~F})\end{array}$ The company's normal capacity is 10,000 direct labor hours.Its budgeted fixed overhead costs for the year were $24,000.During the year,it produced and sold 22,000 beach towels and it purchased 66,250 yards of direct materials; the purchase cost was $0.99 per yard.The average labor rate was $9.10 per hour,and 10,900 direct labor hours were worked.The company's actual variable overhead costs for the year were $55,100,and its fixed costs were $24,500.
Using the data given,compute the following using formulas or diagram form:
1.Direct materials cost variances:
a.Direct materials price variance
b.Direct materials quantity variance
c.Total direct materials cost variance
2.Direct labor cost variances:
a.Direct labor rate variance
b.Direct labor efficiency variance
c.Total direct labor cost variance
3.Variable overhead variances:
a.Variable overhead spending variance
b.Variable overhead efficiency variance
c.Total variable overhead variance
4.Fixed overhead variances:
a.Fixed overhead budget variance
b.Fixed overhead volume variance
c.Total fixed overhead variance

---

Definitions:

Court Order

A formal instruction or command issued by a court, requiring a person or entity to do or refrain from doing something.

Stakeholders

Groups, other than the company’s shareholders, that are affected by corporate decisions. Stakeholders include employees, customers, creditors, suppliers, and the community in which the corporation operates.

Tender Offer

A public offer made by a person, company, or entity to purchase a substantial portion of another company's shares or bonds.

Voting Shares

Stocks that grant the holder the right to vote on corporate matters at shareholders' meetings.