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Sparingly and Vamonos Company

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Sparingly Manufacturing has developed the following standards for one of its products.

Materials: 5 yards × $6 per yard $30.00
Direct labor: 2 hours × $8 per hour 16.00
Variable manufacturing overhead: 2 hours × $5 per hour 10.00
Total standard variable cost per unit $56.00

The company records materials price variances at the time of purchase. The following activity occurred during the month of December:
Materials purchased: 5,200 yards costing $29,900
Materials used: 4,750 yards
Units produced: 1,000 units
Direct labor: 2,100 hours costing $17,850

Required:
a. Calculate the direct materials price variance.
b. Calculate the direct materials usage variance.
c. Calculate the direct labor rate variance.
d. Calculate the direct labor efficiency variance.

Question 2
The variable costing income statement for Vamonos Company for 2014 is as follows:
Sales (5,000 units) $100,000
Variable expenses:
Cost of goods sold $30,000
Selling (10% of sales) 10,000 40,000
Contribution margin $ 60,000
Fixed expenses:
Manufacturing overhead $24,000
Administrative 14,400 38,400
Net income $ 21,600
Selected data for 2010 concerning the operations of the company are as follows:
Beginning inventory -0- units
Units produced 8,000 units
Manufacturing costs:

Direct labor $3.00 per unit
Direct materials 1.60 per unit
Variable overhead 1.40 per unit

Required:
Prepare an absorption costing income statement for 2010.

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