Question

The following summary data are from a performance report for sterling company for may, during which 19,200 units were produced. the budget reflects the company’s normal capacity of 20,000 units. actual cost budget 19,200 20,000 variances units units $ type direct material $205,200 $210,000 $(4,800) favorable direct labor 415,800 420,000 (4,200) favorable variable overhead 147,600 144,000 3,600 unfavorable fixed overhead 108,600 108,000 600 unfavorable total $877,200 $882,000 $(4,800)

Based on the performance report for Sterling Company in May, with 19,200 units produced and a budget reflecting normal capacity of 20,000 units, what are the variances for direct material, direct labor, variable overhead, and fixed overhead?

A) $(4,800) favorable, $(4,200) favorable, $3,600 unfavorable, $600 unfavorable

B) $(4,800) unfavorable, $(4,200) unfavorable, $3,600 favorable, $600 favorable

C) $(4,800) favorable, $(4,200) unfavorable, $3,600 unfavorable, $600 favorable

D) $(4,800) unfavorable, $(4,200) favorable, $3,600 favorable, $600 unfavorable

Answer 1

The variances for Sterling Company's performance report are a $4,800 favorable variance for direct materials, a $4,200 favorable variance for direct labor, a $3,600 unfavorable variance for variable overhead, and a $600 unfavorable variance for fixed overhead.

Step-by-step explanation:

Based on the performance report for Sterling Company in May, where 19,200 units were produced against a budget based on 20,000 units, the variances for direct material, direct labor, variable overhead, and fixed overhead are as follows:

• Direct Material Variance: $(4,800) favorable, indicating that the actual cost was less than the budgeted cost.
• Direct Labor Variance: $(4,200) favorable, showing that the labor costs were lower than what was planned.
• Variable Overhead Variance: $3,600 unfavorable, meaning actual variable overhead was higher than what was budgeted.
• Fixed Overhead Variance: $600 unfavorable, which demonstrates a slight increase over the expected fixed overhead costs.

The correct answer that reflects these variances is A) $(4,800) favorable, $(4,200) favorable, $3,600 unfavorable, $600 unfavorable.