E8-16 and E8-17

E8-16

Variable manufacturing overhead,
Variance analysis.

Esquire Clothing is a manufacturer of designer suits. The cost of each
suit is the sum of three variable costs (direct material costs, direct
manufacturing labor costs, and manufacturing overhead costs) and one fixed –
cost category (manufacturing overhead costs.) Variable manufacturing overhead
cost is allocated to each suiton the basis of budgeted direct manufacturing
labor hours per suit.

For June 2014, each suit is budgeted
to take 4 labor hours. Budgeted variable manufacturing overhead cost per
labor hour is $12. The budgeted number of suits to be manufactured in June
2014 is 1,040.

Actual Variable manufacturing costs
in June 2014 were $52,164 for 1,080 suits startedand completed. There were no
beginning or ending inventories of suits. Actual direct manufacturing labor
hours for June were 4,536.

1. Compute the flexible -budget
variance, the spending variance, and the efficiency variance for variable
manufacturing overhead.

2. Comments on the results.

E8-17

Fixed manufacturing overhead,
varihead, variance analysis (Continuation of 8-16).

Esquire clothing allocates fixed
manufacturing overhead to each suit using budgeted direct manufacturing labor
hours per suit. Data pertaining to fixed manufacturing overhead costs for
June 2014 are budgeted $62,400 and actual $63,916.

1. Compute the spending variance for fixed
manufacturing overhead. Comment on the results.

2. Compute the production-volume for
June 2014. What interference can Esquire Clothing draw from this variance.

 

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