%u201CIt certainly is nice to see that small variance on the income statement af
ID: 2374821 • Letter: #
Question
%u201CIt certainly is nice to see that small variance on the income statement after all the trouble we%u2019ve had lately in controlling manufacturing costs,%u201D said Linda White, vice president of Molina Company. %u201CThe $12,250 overall manufacturing variance reported last period is well below the 3% limit we have set for variances. We need to congratulate everybody on a job well done.%u201D
The company produces and sells a single product. The standard cost card for the product follows:
The following additional information is available for the year just completed:
A total of 78,000 yards of material was purchased during the year at a cost of $3.75 per yard. All of this material was used to manufacture the 20,000 units. There were no beginning or ending inventories for the year.
The company worked 32,500 direct labor-hours during the year at a cost of $11.80 per hour.
Overhead cost is applied to products on the basis of standard direct labor-hours. Data relating to manufacturing overhead costs follow:
Compute the direct materials price and quantity variances for the year. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)
Compute the direct labor rate and efficiency variances for the year. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)
The variable overhead rate and efficiency variances for the year. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)
The fixed overhead budget and volume variances for the year. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)
%u201CIt certainly is nice to see that small variance on the income statement after all the trouble we%u2019ve had lately in controlling manufacturing costs,%u201D said Linda White, vice president of Molina Company. %u201CThe $12,250 overall manufacturing variance reported last period is well below the 3% limit we have set for variances. We need to congratulate everybody on a job well done.%u201D
Explanation / Answer
1. Material price variance = (SP-AP)*AQ =(3.8-4)*65000 =13000U 2. Material usage variance =(SQ-AQ)SP =(67500-65000)3.8 =9500F
3. Labour efficiency variance =(SH-AH)*SR =27500U 4. Labour rate variance = (SR-AR)AH =8400F
5. Variable rate variance =(SR-AR)*SH =2000U 6. Variable efficiency variance = (SH-AH)*SR =6250U
7. Volume Variance = Recoverable overhead %u2013 Budgted overheard Recoverable overhead = (SH*SR) = 13750F 8. Budgeted overhead variance =Budgeted overhead %u2013 actual overhead =2500F
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.