The Justice Corporation mass produceswooden chairs. The standard costs follow:
Plastic 10 pounds at $4.50 per pound.
Molding 3 feet at $3.00 per foot.
Directlabor 4hours at $15.00 per hour.
Variable overhead $3per direct labor hour.
Fixedoverhead $.75 per direct labor hour.
The static budget called for 80,000 direct labor hours in June.
Transactions during June follow:
- Justice purchased 200,000 pounds of plastic at $ 4.45 andissued 185,000 pounds to production.
- Justice purchased 60,000 feet of molding at $3.10 per foot andissued 50,000 feet to production.
- The direct labor payroll was 72,500 hours at $14.50.
- Overhead costs were $275,000 of which $221,125 wasvariable.
- Justice produced 18,000 chairs during the month.
Required:
- Compute the direct materials, direct labor,variable overhead, and fixed overhead variances that were discussedin class.
- Discuss the significance of thevariances.
