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calculate the materials labour variable overhead and fixed overhead variances 594047

(Variance Analysis) Elsie”s Muffins makes two types of muffin that are sold to grocery stores: the standard muffin (which comes in various flavours such as carrot, chocolate chip, bran, and apple spice) and the gourmet muffin (which is injected with homemade jelly and topped with a nut crumble). The direct materials and labour used to make a package of 24 of both the standard and the deluxe brand muffins and their standard costs are shown in the following table:

Standard Muffins

Deluxe Muffin

Quantity

Cost

Quantity

Cost

Baking mix

1 kg

$2 per kg

1.1 kg

$2 per kg

Paper cups

24

$0.005 per cup

24

$0.006 per cup

Jelly and nut crumble

n/a

n/a

350g

$0.005 per gram

Direct labour

7 minutes

$20 per hour

9 minutes

$20 per hour

Variable overhead is assigned to each package based on direct labour dollars at a rate of 40% of direct labour costs. The factory has total fixed overhead costs budgeted at $50,000 for the year, based on a total production volume of 50,000 packages of muffins per year.

During 2012, Elsie”s sold 54,000 packages of muffins: 42,000 standard and 12,000 deluxe. The company used 51,500 kg of baking mix; 1,325,000 paper cups; 3,800 kg of jelly and nut crumble; and 6,800 direct labour hours. Elsie”s spent a total of $100,000 on baking mix; $7500 on paper cups; $22,500 for jelly and nut crumble; and $147,000 on direct labour. For 2012, actual fixed overhead costs were $48,500 and variable overhead costs were $52,000.

  1. Calculate the materials, labour, variable overhead, and fixed overhead variances.
  2. Which variances need further investigation?
  3. Provide a possible explanation for each significant variance.

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