Cool Leather Products (CLP) produces leather clothing and accessories. The company has developed a static budget for its leather purses manufacturing department for the first quarter. During the quarter the actual activity was 22,000 direct labour hours. Results at the end of the first quarter are shown below. Direct labour hours Direct materials Direct labour Rent Share of fixed manufacturing overhead Total Costs Static Budget Actual 20,000 22,000 $80,000 $91,000 160,000 174,000 48,000 50,000 12,000 11,000 $300,000 $326,000 Required: a) Calculate relevant variances to assess cost control for the manufacturing department. b) Provide a reasonable explanation for the variances with respect to direct materials and direct labour.
Cool Leather Products (CLP) produces leather clothing and accessories. The company has developed a static budget for its leather purses manufacturing department for the first quarter. During the quarter the actual activity was 22,000 direct labour hours. Results at the end of the first quarter are shown below. Direct labour hours Direct materials Direct labour Rent Share of fixed manufacturing overhead Total Costs Static Budget Actual 20,000 22,000 $80,000 $91,000 160,000 174,000 48,000 50,000 12,000 11,000 $300,000 $326,000 Required: a) Calculate relevant variances to assess cost control for the manufacturing department. b) Provide a reasonable explanation for the variances with respect to direct materials and direct labour.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Cool Leather Products (CLP) produces leather clothing and accessories. The
company has developed a static budget for its leather purses manufacturing
department for the first quarter. During the quarter the actual activity was 22,000
direct labour hours. Results at the end of the first quarter are shown below.
Direct labour hours
Direct materials
Direct labour
Rent
Share of fixed manufacturing overhead
Total Costs
Static Budget
Actual
20,000 22,000
$80,000 $91,000
160,000 174,000
48,000 50,000
12,000
11,000
$300,000 $326,000
Required:
a) Calculate relevant variances to assess cost control for the manufacturing
department.
b) Provide a reasonable explanation for the variances with respect to direct materials
and direct labour.
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