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Standard Cost Variances

Boise Recreational Supplies makes a large tent
that they sell to the U. S. Army. Following is the information relative to the
year ended December 31, 2013.  During the
year they manufactured 1,000 tents. Standard cost for each tent is as follows:
50 yards of canvas with a standard price of $5.00 per yard. It takes a worker 8
hours to cut and stitch a tent. Workers standard labor rate is $20 per hour.
Variable overhead is applied at the rate of $5.00 per direct labor hour.

During the year they purchased 60,000 yards of
canvas for $360,000. They used 55,000 yards to produce the 1,000 tents. The
laborers worked 7,000 direct labor hours and were paid $175,000.  Actual variable overhead was $49,000.


  1. Compute the
    material quantity and price variances.
  2. Compute the
    labor efficiency and rate variances.
  3. Compute the
    variable overhead spending and efficiency variances.
  4. Why do
    companies do variance analysis?
  5. To what
    general ledger accounts are the variances closed to?

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