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:

Sherman Antitrust Act

A landmark federal statute passed in 1890 aimed at promoting economic competition by prohibiting monopolies and other activities that restrict trade.

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Legislation enacted to prevent new monopolies from forming, break up those that already exist, and regulate anti-competitive practices that may harm the market or consumers.

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