Huang Company uses a standard cost accounting system to account for the manufacture of exhaust fans. In July 2016, it accumulates the following data relative to 1,800
units started and fi nished.
Cost and Production Data Actual Standard
Raw materials
Units purchased 21,000
Units used 21,000 22,000
Unit cost $3.70 $3.50
Direct labor
Hours worked 3,450 3,600
Hourly rate $11.50 $12.00
Manufacturing overhead
Incurred $94,800
Applied $100,800
Manufacturing overhead was applied on the basis of direct labor hours. Normal capacity
for the month was 3,400 direct labor hours. At normal capacity, budgeted overhead costs
were $16 per labor hour variable and $12 per labor hour fi xed. Total budgeted fi xed overhead costs were $40,800.
Jobs fi nished during the month were sold for $270,000. Selling and administrative
expenses were $20,000.
Instructions
(a) Compute all of the variances for (1) direct materials and (2) direct labor.
(b) Compute the total overhead variance.
(c) Prepare an income statement for management. (Ignore income taxes.)