QUESTION ONE:

Comprehensive Standard Cost Variances

Clarissa McWhirter, vice-president of Cyprus Company, waspleased to see a small variance on the income statement after thetrouble the company had been having in controlling manufacturingcosts. She noted that the $12,250 overall manufacturing variancereported last period was well below the 3% limit that had been setfor variances. The company produces and sells a single product. Thestandard cost card for the product follows:

Standard Cost Card -Per Unit

Direct materials, 4 metres at $3.50 per metre                                                  $14

Direct labour, 1.5 direct labour-hours at $12 per directlabour-hour               18

Variable overhead, 1.5 direct labour-hours at $2 per directlabour-hour          3

Fixed overhead, 1.5 direct-labour hours at $6 per directlabour-hour              9

Standard cost perunit                                                                                            44

                                                                                           

The following additional information is available for the yearjust completed:

a. The company manufactured 20,000 units of product during theyear.

b. A total of 78,000 metres of material was purchased during theyear at a cost of $3.75 per metre. All of this material was used tomanufacture the 20,000 units. There were no beginning or endinginventories for the year.

c. The company worked 32,500 direct labour-hours during the yearat a cost of $11.80 per hour.

d. Overhead cost is applied to products on the basis of standarddirect labour-hours. Data relating to manufacturing overhead costsfollow:

Denominator activity level (direct labour-hours)                           25,000

Budgeted fixed overhead costs (from the flexiblebudget)       $150,000

Actual fixed overheadcosts                                                          $148,000

Actual variable overheadcosts                                                     $68,250

Required:

1. Compute the direct materials price and quantity variances forthe year.
2. Compute the direct labour rate and efficiency variances for theyear.
3. For manufacturing overhead, compute the following:
   1. The variable overhead spending and efficiency variances for theyear.
   2. The fixed overhead budget and volume variances for theyear.
4. Total the variances you have computed, and compare the netamount with the $12,250 mentioned by the vice-president Do youthink that everyone should be congratulated for a job well done?Explain.