PROBLEM 11-9. Comprehensive Variance Problem [LO 2,3,4] Bowser Products operates a small plant in New Mexico that produces dog food in batches of 1,200 pounds. The product sells for $4 per pound. Standard costs for 2012 are: Standard direct labor cost = $16 per hour Standard direct labor hours per batch = 9 hours Standard price of material A = $0.25 per pound Standard pounds of material A per batch = 900 pounds Standard price of material B = $0.45 per pound Standard pounds of material B per batch = 300 pounds Fixed overhead cost per batch = $500 At the start of 2012, the company estimated monthly production and sales of 50 batches. The company estimated that all overhead costs were fixed and amounted to $25,000 per month. During the month of June 2012 (typically a somewhat slow month), 40 batches were produced (not an unusual level of production for June). The following cost were incurred: Direct labor costs were $6,800 for 400 hours. 36,500 pounds of material A costing $7,300 were purchased and used. 12,000 pounds of material B costing $5,520 were purchased and used. Fixed overhead of $24,400 was incurred. a. Calculate variances for material, labor, and overhead. b. Prepare a summary of the variances. Does the unfavorable overhead volume variance suggest that overhead cost are out of control?
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