Posted: January 20th, 2016
SoundSmart manufactures headphone cases. During September 2012, the company produced 108,000 cases and recorded the following cost data:
Standard Cost Information:
Quantity | Price | |
Direct materials | 2 parts | $ 0.16 per part |
Direct labor | 0.02 hours | $ 7.00 per hour |
Variable manufacturing overhead | 0.02 hours | $11.00 per hour |
Fixed manufacturing overhead ($29,400 for static budget volume of 98,000 units and 1,960 hours, or $15 per hour)
Actual Information:
Direct materials (193,000 parts @ $0.21 per part = $40,530)
Direct labor (1,760 hours @ $7.15 per hour = $12,584)
Variable manufacturing overhead ,000
Fixed manufacturing overhead, $30,000
Requirements
Discuss the trade-off between the two direct material variances.
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