Fredman Company Has a Standard Costing System and Keeps All

question 33

Essay

Fredman Company has a standard costing system and keeps all its costs up to date.The company's main product is copper wind chimes,which are made in a single department.The standard variable costs for one wind chime (unit)are as follows:
$$\begin{array} { | l r | } \hline \text { Direct materials ( } 3 \text { yards at } \$ 12.50 \text { per yard) } & \$ 37.50 \\\text { Direct labor } ( 2 \text { hours at } \$ 9.00 \text { per hour) } & 18.00 \\\text { Variable overhead } ( 2 \text { hours } @ \$ 5.00 \text { per direct labor hour) } & 10.00 \\\text { Standard variable cost per unit } & \$ 65.50 \\\hline\end{array}$$
The company's normal capacity is 10,000 direct labor hours.Its budgeted fixed overhead costs for the year were $44,000.During the year,it produced and sold 4,900 wind chimes and it purchased 15,000 yards of direct materials; the purchase cost was $12.40 per yard.The average labor rate was $9.10 per hour,and 10,050 direct labor hours were worked.The company's actual variable overhead costs for the year were $48,900,and its fixed costs were $45,000.
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:

Budget Variance

The difference between the budgeted or projected financial performance and the actual performance.

Fixed Overhead

Costs that do not vary with the level of production or sales, including expenses such as rent, salaries, and insurance.

Control Variance

The difference between expected performance standards and actual performance, used for budget and performance evaluation.

Productive Capacity

Refers to the maximum output or productive ability of resources, facilities, or organizations, emphasizing efficiency and optimization.