SmartSound manufacturers headphone cases. During September 2011, the company produced 105,000 cases and recorded the following data:
| Quantity Price | |
|---|---|
| Direct materials | 2 parts, 0.15 per part |
| Direct labor | 0.02 hours, 9.00 per hour |
| Variable manufacturing overhead | 0.02 hours, 9.00 per hour |
| Fixed manufacturing overhead | $28,5000 for static budget volume of 95,000 units and 1,900, or $15 per hour |
| Actual information | |
| Direct materials | 235,000 parts @ $0.20 per part = $47,000 |
| Direct labor | 1,700 hours @ $9.15 per hours = $15,555 |
| Manufacturing overhead | $61,000 |
1. Compute the price variance and efficiently variance for direct materials and for direct labor.
2. For manufacturing overhead, compute the total variance, the flexible budget variance, and the production volume variance.
3. Prepare a standard cost income statement through gross profit to report all variances to management. Sale price of the headset cases was $1.50 each.
4. SmartSound’s management used more-expensive workers during September. Explain the trade-off between the two direct labor variances.
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