Aquatic Art, Inc. manufactures glass aquariums that are placed inside walls in homes and offices. The standard cost for the bestselling aquarium is as follows:
Penelope Pope, the operations manager for the aquarium division, was reviewing the results for October when she became upset by some of the unfavorable variances she was seeing. She asked CFO Harvey Hinklestein for more information about the matter. He provided Penelope the following overhead budgets, along with actual results for October.
The company purchased and used 160,400 pounds of sand to make the glass for the aquariums during the month. The sand used is fine and high quality, with a low melting temperature and therefore allows for stronger and clearer glass. Sand purchases during the month were made at $7.80 per pound. The direct labor payroll ran $625,500, with an actual hourly rate of $24.50 per DLH. The annual budgets were based on the production of 500,000 aquariums, using 500,000 direct labor hours. Though the budget for October was based on 45,000 aquariums, the company actually produced 48,000 aquariums during the month.
Required:
a. The standard cost for one aquarium
b. Calculate the direct materials price and quantity variances for October.
c. Calculate the direct labor rate and efficiency variances for October.
d. Calculate the variable overhead spending and efficient variances for October.
e. Which of these variances should Penelope be held responsible for? Why?
