Reference no: EM132768333

Question - Clarissa McWhirter, vice-president of Cyprus Company, was pleased to see a small variance on the income statement after the trouble the company had been having in controlling manufacturing costs. She noted that the $9,030 overall manufacturing variance reported last period was well below the 3% limit that had been set for variances. The company produces and sells a single product. The standard cost card for the product follows:

Standard Cost Card-Per Unit

Direct materials, 4 metres at $2.20 per metre $8.80

Direct labour, 1.2 direct labour-hours at $8.0 per direct labour-hour 9.60

Variable overhead, 1.2 direct labour-hours at $2.3 per direct labour-hour 2.76

Fixed overhead, 1.2 direct labour-hours at $5 per direct labour-hour 6.00

Standard cost per unit $27.16

The following additional information is available for the year just completed:

The company manufactured 17,000 units of product during the year.

A total of 67,140 metres of material was purchased during the year at a cost of $2.50 per metre. All of this material was used to manufacture the 17,000 units. There were no beginning or ending inventories for the year.

The company worked 21,100 direct labour-hours during the year at a cost of $7.60 per hour.

Overhead cost is applied to products on the basis of standard direct labour-hours. Data relating to manufacturing overhead costs follow:

Denominator activity level (direct labour-hours) 18,800

Budgeted fixed overhead costs (from the flexible budget) $94,000

Actual fixed overhead costs $92,150

Actual variable overhead costs $50,390

Required -

1. Compute the direct materials price and quantity variances for the year.

2. Compute the direct labour rate and efficiency variances for the year.

3. For manufacturing overhead, compute the following:

a. The variable overhead spending and efficiency variances for the year.

b. The fixed overhead budget and volume variances for the year.

4. Compute the total variance.