Question : Esquire Clothing is a manufacturer of designer
Esquire Clothing is a manufacturer of designer suits. The cost of each suit is the sum of three variable costs (direct material costs, direct manufacturing labor costs, and manufacturing overhead costs) and one fixed-cost category (manufacturing overhead costs). Variable manufacturing overhead cost is allocated to each suit on the basis of budgeted direct manufacturing labor-hours per suit. For June 2012 each suit is budgeted to take four labor-hours. Budgeted variable manufacturing overhead cost per labor-hour is $12. The budgeted number of suits to be manufactured in June 2012 is 1,040. Actual variable manufacturing costs in June 2012 were $52,164 for 1,080 suits started and completed. There were no beginning or ending inventories of suits. Actual direct manufacturing labor-hours for June were 4,536. Required: 1. Compute the flexible-budget variance, the spending variance, and the efficiency variance for variable manufacturing overhead. 2. Comment on the results.