Summer Fun – Variances

Summer Fun Products makes a large beach umbrella. It consists of a canvas top that is sewn together from precut pieces plus a wood pole and arch structure. Below is information relative to the canvas process for the month of June 2014.

  Standard material cost per yard  $5.00

  Standard labor rate per hour  $25.00

  Standard variable overhead rate per DLH  $2.00

  Standard Material to make one umbrella  3 Yards

  Standard Labor Hours to make one umbrella2 Hours

During the month of June the firm made 1,000 umbrellas. They paid $57,600 in direct labor for 1800 hours of labor.  They actually purchased 3,500 yards of material for $15,995. Actual variable overhead was $4,500.

Required:

Compute the material quantity and price variances.

Compute the labor rate and efficiency variances.

Compute the actual variable overhead rate.

Compute the variable overhead spending and efficiency variances.

To what general ledger account does a company close variances?

Discuss any relationships you might see between the various components of the direct labor and direct material variances.

 

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