7.15     Eastern Company manufactures special electrical equipment and parts. Eastern costs, with separate standards established for each product. A special transforme tured in the Transfor mer Department. Production volume is measured by direct

this  department,  and  a flexible  budget  system is used  to plan  and control departme Standard costs for the special transformer  are determined  annually  in September f year.  The  standard  cost  of  a  transformer  for  l9X7  was  $67.00:

 

 

 

 

Direct materials: Iron

Copper Direct la bor

Variable overhead Fixed overhead

Total

 

 

5 sheets @ S2.00 = $10.00 3 spools @ $3.00 =              9.00

4  hours  @ $7.00            28.00

4  hours  @ $3.00            12.00

4  hours  @ $2.00               8.00

$67.00

 

 

Overhead rates were based on normal and expected mont hly  labor hours for  19X7, were 4,000 direct labor hours. Practical capacit y for this department is 5,000 direct lab month. Variable overhead costs are expected to vary with the n u m ber of direct la bor hours

During October 19X7, 800 transformers were prod uced. This was below expectatio work stoppage occurred during contract negotiations with the labor force. Once the settled, the department scheduled overtime in an attempt to catch up to expected prod Actual costs incurred in October l 9X7 were as follows:

 

 

Direct materials:

 

                        Purchased                                                Used         

 

Iron Copper

Direct  la bor:

 

5,000 sheets @ $2.00 per sheet 2,200 spools @  $3.10

 

3,900 sheets

2,600 spools

 

Regular   time                      2,000  hours  @ $7.00 1,400 hours  @ $7.20

Overtime                                600 of  the  1,400 hours were  subject  to  overtime premium overtime premi um of $2,160 is included in variable overh accordance  with  corporate  accoun ting practices.

Variable  overhead           $10,000 Fixed  overhead $ 8,800

 

Prepare a complete analysis of a ll production variances. Use a four-way analysis Materials  price  variances  are isolated  at the  time  of purchase.