Inman Corporation manufactures a single product. The standard cost per unit of product is as follows.
Direct materials – 2 pounds of plastic at $5 per pound $10
Direct labor – 2 hours at $12 per hour 24
Variable manufacturing overhead 12
Fixed manufacturing overhead 6
Total standard cost per unit $52
The master manufacturing overhead budget for the month based on normal productive capacity of 15,000 direct labor hours (7,500 units) shows total variable costs of $90,000 ($6 per labor hour) and total fixed costs of $45,000($3 per labor hour). Normal productive capacity is 15,000 direct labor hours. Overhead is applied on the basis of direct labor hours. Actual costs for November in producing 7,600 units were at follows:
Direct materials (15,00 pounds) $73,500
Direct labor (14,900 hours) 181,780
Variable overhead 88,990
Fixed overhead 44,000
Total manufacturing costs $388,270
The purchasing department normally buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories., therefore, can be ignored.
Compute all materials , labor, and overhead variances.
This solution explains how to calculate material, labor, and overhead variances based on given expected and actual values.