. The Beal Manufacturing Company’s costing system has two direct-cost categories: direct
materials and direct manufacturing labor. Manufacturing overhead (both variable and
fixed) is allocated to products on the basis of standard direct manufacturing labor-hours
(DLH). At the beginning of 2020, Beal adopted the following standards for its
manufacturing costs:
Input Cost per Output
Unit
Direct materials 3 lb. at $5 per lb. $15.00
Direct manufacturing labor 5 hrs. at $15 per hr. 75.00
Manufacturing overhead:
Variable $6 per DLH 30.00
Fixed $8 per DLH 40.00
Standard manufacturing cost per output unit $160.00
The denominator level for total manufacturing overhead per month in 2020 is 40,000
direct manufacturing labor-hours. Beal’s flexible budget for January 2020 was based on
this denominator level. The records for January indicated the following:
Direct materials purchased 25,000 lb. at $5.20 per lb.
Direct materials used 23,100 lb.
Direct manufacturing labor 40,100 hrs. at $14.60 per hr.
Actual variable manufacturing overhead $275,000
Actual fixed manufacturing overhead $325,000
Actual production 7,800 output units
For the month of January 2020, compute the following variances, indicating whether each
is favorable (F) or unfavorable (U):
a. Direct materials price variance based on purchases
b. Direct materials efficiency variance
c. Direct manufacturing labor price variance
d. Direct manufacturing labor efficiency variance
e. Total manufacturing overhead spending variance
f. Variable manufacturing overhead efficiency variance
g. Spending variance
h. Production-volume variance