Question & Answer: Kringle Novelties Company, a maker of Christmas novelties, needs your help immediately. The company accountant resigned without leaving…..

4   Kringle Novelties Company, a maker of Christmas novelties, needs your help immediately. The company accountant resigned without leaving                                           adequate records or explanations for the data collected. In reviewing the records for one product line, you find the following information for last month:

Materials purchased                                           20,000 units @ $.60 each

Materials used                                                    15,000 units

Direct labor costs incurred                               $36,000

Variable overhead costs incurred                      $6,675

Actual fixed overhead                                        $7,200

Completed units                                                 7,000

You learn that the standards for the product are:

Direct materials                                              2 units

Direct labor                                                    1 hour

Variable overhead                                          $0.95 per direct labor hour

Fixed overhead                                               $0.60 per direct labor hour

You find a copy of the budget which shows that $ 6,000 was budgeted for fixed overhead, and that variable overhead was budgeted at $9,500 when 10,000 direct labor hours are worked per month

You also find some handwritten notes among the accountant’s work papers, which indicate the following:

Standard price per unit for materials       $ .62

Actual average wage rate                       $4.80 ($.20 less than the standard)

Required:

(a) Compute the eight variances

(b) Comment on the results.