Ch. 8, 34 Budget Information Paint set production Direct manuf. Labor hours per paint set (hours) Direct manuf. Labor rate per hour Variable manuf. OH rate per hour 1) Actual Costs Incurred $693,680.00 Price Variance: Efficiency Variance 2) Actual Costs Incurred 25,000 2 $10 $20 Actual Results 29,000 2.3 $10.40 $18.95

Actual Input Q x Budg. Rate Flexible budget $667,000 $580,000 $26,680.00 Unfavorable $87,000 Unfavorable

Actual Input Q x Budg. Rate Flexible Budget $1,263,965.00 $1,334,000 $1,160,000 $70,035.00 Favorable $174,000 Unfavorable

Spending Variance Efficiency Variance

3) For variable manufacturing overhead, the favorable spending variance suggests that cheaper items were used, which could p which could be that more skilled/qualified workers were hired, which should lead to favorable labor efficiency variances. Due that the efficiency variances were related to factors other than the cost of the labor or overhead.

4) It depends, Sarah is correct if the variable overhead costs consisted only of costs that were related to direct manufacturing la variance would reflect actual cost overruns due to the inefficient use of labor hours. However, a part of variable overhead ma variable overhead using direct labor as the only base will inflate the effect of inefficient labor usage on the variable overhead and will be captured in a favorable spending variance for variable overhead.

items were used, which could possibly have a negative impact on labor efficiency. However, the workers were paid more than budgeted, e labor efficiency variances. Due to the fact that the price and spending variances are much smaller than the efficiency variances, suggest

elated to direct manufacturing labor, because in this case, both both the labor efficiency variance and the variable overhead efficiency r, a part of variable overhead may be a function of other factors