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Michael Roberts is a cost accountant and business analyst for
Michael Roberts is a cost accountant and business analyst for Darby Design Company (DDC),
which manufactures expensive brass doorknobs. DDC uses two direct cost categories: direct
materials and direct manufacturing labor. Roberts feels that manufacturing overhead is most
closely related to material usage. Therefore, DDC allocates manufacturing overhead to
production based upon pounds of materials used.
At the beginning of 2014, DDC budgeted annual production of 410,000 doorknobs and adopted
the fol-lowing standards for each doorknob:
Required
1. For the month of April, 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. Variable manufacturing overhead spending variance
f. Variable manufacturing overhead efficiency variance
g. Production-volume variance
h. Fixed manufacturing overhead spending variance
2. Can Roberts use any of the variances to help explain any of the other variances?
Giveexamples.
ANSWER
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