Variance of Total Budgeted Production Cost Assignment | Homework For You

At the start of the year, Chiller Ice estimated that the company would produce 480 portable ice makers during the year (40 per month). Annual fixed overhead costs were estimated to be $600,000 ($50,000 per month), and estimated variable overhead costs were estimated to be $500 per unit. Standard cost per unit was set at $3,450:

Standard material cost Standard labor cost $1,200 500 Standard overhead rate per unit Total 1,750 $3.450

During the year, the company experienced stiff competition and ended up producing and selling only 400 ice makers. Budgeted annual total production costs were $1,656,000, and actual production costs were $1,616,400. The standard cost variances were as follows:

$ 2,200 unfavorable 11,500 unfavorable (2,300) favorable 4,800 unfavorable 2,000 unfavorable 100,000 unfavorable s18,200 unfavorable Material price variance Material quantity variance Labor rate variance Labor efficiency variance Controllable overhead variance Overhead volume variance Total

Suppose you are the CFO of Chiller Ice and you have decided to investigate variances which exceed a threshold of 1/2 percent of the total budgeted production cost. Which variance(s) will you investigate? Explain the basis for your answer. Comment briefly on the notion whether large variances would have any impact the strategic cost advantage of the company. Get Finance homework help today