Flexible Budgets - Overhead Cost Variances Case Studies with solutions

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Variable Overhead Variance Case Study Esquire Clothing is a manufacturer of designer suits. The cost of each suit is the sum of three variable costs (direct material costs, direct manufacturing labor costs, and manufacturing overhead costs) and one fixed-cost category (manufacturing overhead costs). Variable manufacturing overhead cost is allocated to each suit on the basis of budgeted direct manufacturing labor- hours per suit. The following data is available: Budgeted labor hours per suit…. 4 hours Budgeted variable manufacturing overhead per labor-hour….. $12.00 Budgeted number of suits to be manufactured…….. 1,040 Actual variable manufacturing costs …… $52,164 Actual number of suits manufactured…. 1,080 Actual direct manufacturing labor hours…………. 4,536 There were no beginning or ending inventories of suits. Required: 1. Compute the flexible-budget variance, the spending variance, and the efficiency variance for variable manufacturing overhead. 2. Comment on the results.
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