Performance Evaluation
One of your clients, Moore Manufacturing has asked you to assist them in evaluating their performance against their budgets. The management of Moore Manufacturing has provided the following standard cost sheet for one of its products:
| Direct Materials | 6 lb @ $2 per pound | $12 |
| Direct Labor | 3 hrs @ $25 per hr | $75 |
| Variable factor overhead | 2 hrs @ $4 per hour | $8 |
| Fixed factory overhead | 2 hr @ $15 per hour | $30 |
| Cost per unit | $125 |
Moore Manufacturing applies factory overhead based on direct labor hours and factory overhead is allocated based on a practical capacity of 500 units of product.
The actual operating results for the year are as follows:
| Units manufactured | 400 | |
| Direct materials purchased and used | 1,800 pounds | $19,800 |
| Direct labor incurred | 750 hours | 20,250 |
| Variable factory overhead incurred | 5,000 | |
| Fixed factory overhead incurred | 15,800 |
Determine the following for the period:
Flexible budget for variable overhead based on output for the period
Total variable overhead applied to production during the period
Total budgeted fixed factory overhead
Total fixed factory overhead applied to production during the period
Calculate the following variances using four-variance analysis:
Total variable overhead variance
Variable overhead spending variance
Variable overhead efficiency variance
Total under applied or over applied variable overhead
Fixed overhead spending variance
Production volume variance
Total fixed overhead variance
Total under applied or over applied fixed overhead
Calculate the following variances using three-variance analysis:
Factory overhead spending variance
Factory overhead efficiency variance
Production volume variance
Calculate the total overhead flexible budget variance and the production volume variance using a two-variance analysis.
Part Two:
In a 750 word document, explain to the management team at Moore Manufacturing about the variances and evaluation of their performance.
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