Mirada Manufacturing produces stained glass lamp shades. The standard cost card for a lamp shade is as follows:
| Standard Price | Standard Quantity | Standard Cost |
| Direct materials | $4.80/pound | 1.25 pounds | $ 6.00 |
| Direct labor | $36.00 per DLH | 0.25 DLH | 9.00 |
| Variable overhead | $12.00 per DLH | 0.25 DLH | 3.00 |
| Fixed overhead | $18.00 per DLH | 0.25 DLH | 4.50 |
| Total standard cost per shade | $22.50 |
Ron Shop, operations manager, became upset when he reviewed the unfavorable variances for April. He asked Heidi Cotton, controller, for more information. She provided the following overhead budgets, along with the actual results for April.
| • | The company purchased and used 115,000 pounds of glass during the month. |
| • | Glass purchases during the month were made at $4.35 per pound. |
| • | The direct labor payroll ran $744,150, with an actual hourly rate of $36.30 per direct |
labor hour.
| • | The annual budgets were based on the production of 1,000,000 shades, using 250,000 |
direct labor hours.
| • | The company actually produced 82,000 shades during the month. |
| | Annual Budget | | Per Shade | | April — Actual |
| Indirect material | $1,350,000 | | $1.35 | | $108,000 |
| Indirect labor | 900,000 | | 0.90 | | 101,100 |
| Equipment repair | 600,000 | | 0.60 | | 49,200 |
| Equipment power | 150,000 | | 0.15 | | 36,900 |
| Total | $3,000,000 | | $3.00 | | $295,200 |
| | | Annual Budget | April — Actual |
| Supervisory salaries | $ 780,000 | | $ 66,000 |
| Insurance and property tax | 1,290,000 | | 108,000 |
| Depreciation | 1,800,000 | | 191,700 |
| Utilities | 630,000 | | 64,800 |
| Total | $4,500,000 | | $430,500 |
Required:
| a. | Calculate the direct materials price and quantity variances for April. |
| b. | Calculate the direct labor rate and efficiency variances for April. |
| c. | Calculate the variable overhead spending and efficiency variances for April. |
| d. | Calculate the fixed overhead spending variance for April. |
| e. | Provide an explanation for each variance you calculated. |
| f. | Which of these variances should Ron be held responsible for? Why? |
Quick Reply
