HearSmart manufactures headphone cases. During September 2012, the company produced

| June 1, 2016

Question
P23-30A HearSmart manufactures headphone cases. During September 2012, the company produced and sold 107,000 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

$ 8.00 per hour

Variable manufacturing overhead

0.02hours

$ 9.00 per hour

Fixed manufacturing overhead ($32,980 for static budget volume of 97,000 units and 1,940 hours, or $17 per hour)

Actual Information:

Direct materials (210,000 parts @ $0.21 per part = $44,100)

Direct labor (1,640 hours @ $8.15 per hour = $13,366)

Variable manufacturing overhead $8,000

Fixed manufacturing overhead $30,000

Requirements

1. Compute the price and efficiency variances for direct materials and direct labor.

2. For manufacturing overhead, compute the variable overhead spending and efficiency variances and the fixed overhead spending and volume variances.

3. HearSmart’s management used better quality materials during September. Discuss the trade-off between the two direct material variances.

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