Krane Company Has a Standard Costing System and Keeps All

question 37

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:

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

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Definitions:

Layoff Cost

Expenses incurred by an organization when it temporarily or permanently terminates employment, typically including severance pay and benefits continuation.

Hiring And Training Cost

Expenses incurred in recruiting and equipping new employees with the necessary skills and knowledge for their roles.

Labor Hours

The total number of work hours contributed by employees for productive activities over a specified period.

Inventory Holding Cost

The total cost associated with keeping inventory in stock, including storage, insurance, taxes, depreciation, and opportunity costs.