There were no beginning or ending inventories of direct materials. The direct materials price… 1 answer below »

FLEXIBLE BUDGET, STANDARD COST VARIANCES, T-ACCOUNTS

Correr Company manufactures a line of running shoes. At the beginning of the period, the following plans for production and costs were revealed:

Units to be produced and sold

25,000

Standard cost per unit:   Direct materials $10

Direct labor

8

Variable overhead

4

Fixed overhead

3

Total unit cost

$25

During the year, 30,000 units were produced and sold. The following actual costs were incurred:

Direct materials

$320,000

Direct labor

220,000

Variable overhead

125,000

Fixed overhead

89,000

There were no beginning or ending inventories of direct materials. The direct materials price variance was $5,000 unfavorable. In producing the 30,000 units, a total of 39,000 hours were worked, 4 percent more hours than the standard allowed for the actual output. Overhead costs are applied to production using direct labor hours.

Required:

1. Prepare a performance report comparing expected costs to actual costs.

2. Determine the following:

a. Direct materials usage variance.

b. Direct labor rate variance.

c. Direct labor usage variance.

d. Fixed overhead spending and volume variances.

e. Variable overhead spending and efficiency variances.

3. Use T-accounts to show the flow of costs through the system. In showing the flow, you do not need to show detailed overhead variances. Show only the overand underapplied variances for fixed and variable overhead.

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