PROBLEM 11-10. Comprehensive Variance Problem [LO 2,3,4,6] Antikron Company prod
ID: 2417930 • Letter: P
Question
PROBLEM 11-10. Comprehensive Variance Problem [LO 2,3,4,6] Antikron Company produces rubber seals used in the aerospace industry.Standards call for 3 pounds of material at $2.50 per pound for each seal.The standard cost for labor is 1.5 hours at $15 per hour.Standard overhead is $10 per unit.For the year 2015,expected production is 130,000 seals with xed overhead of $130,000 and variable overhead of $9 per seal.During 2015,a total of 125,000 seals were produced.The company purchased 455,000 pounds of material for $1,150,000.Production required 425,000 pounds of material.The cost of direct labor incurred was $2,900,000 with an actual average wage rate of $15.25 per hour.Actual overhead for the year was $900,000.
Required
a. Determine the standard cost per seal.
b. Calculate the material,labor,and overhead variances.
c. Prepare a summary of the variances,and indicate which variances should be investigated.
Explanation / Answer
1
Calculation of standard cost per seal:
Quantity / Hours
Price / Rate
Cost
A
B
=A*B
Material Cost
3 Pounds
$ 2.50
$ 7.50
Labor Cost
1.5 Hours
$ 15.00
$ 22.50
Overhead Cost
1.5 Hours
$ 10.00
$ 15.00
Standard cost per seal =
$ 45.00
2
Calculation of Material variances:
Formula
Calculation
Varinace
Material Price variance
(Actual Price - Standard Price) * Actual Quantity
(2.53-2.50)*455000
$ 13,650.00
Unfavoravle
Actual Price =1150000 / 455000 = $2.53
Material Quantity variance
(Actual Quantity - Standard Quantity) * Standard Price
(455000-375000)*$2.50
$ 200,000.00
Unfavoravle
Standard Quantity = 125000 seals *3 = 375000 Pounds
3
Calculation of Labor variances:
Formula
Calculation
Varinace
Labor rate variance
(Actual rate - Standard rate) * Actual hours
(15.25-15)*190164
$ 47,541.00
Unfavoravle
Actual hours = $2900000/$15.25 = 190164 Hours
Labor efficiency variance
(Actual hours - Standard hours) * Standard rate
(190164-187500)*15
$ 39,960.00
Unfavoravle
Standard Hours = 125000 seals *1.5 hours = 187500 hours
1
Calculation of standard cost per seal:
Quantity / Hours
Price / Rate
Cost
A
B
=A*B
Material Cost
3 Pounds
$ 2.50
$ 7.50
Labor Cost
1.5 Hours
$ 15.00
$ 22.50
Overhead Cost
1.5 Hours
$ 10.00
$ 15.00
Standard cost per seal =
$ 45.00
2
Calculation of Material variances:
Formula
Calculation
Varinace
Material Price variance
(Actual Price - Standard Price) * Actual Quantity
(2.53-2.50)*455000
$ 13,650.00
Unfavoravle
Actual Price =1150000 / 455000 = $2.53
Material Quantity variance
(Actual Quantity - Standard Quantity) * Standard Price
(455000-375000)*$2.50
$ 200,000.00
Unfavoravle
Standard Quantity = 125000 seals *3 = 375000 Pounds
3
Calculation of Labor variances:
Formula
Calculation
Varinace
Labor rate variance
(Actual rate - Standard rate) * Actual hours
(15.25-15)*190164
$ 47,541.00
Unfavoravle
Actual hours = $2900000/$15.25 = 190164 Hours
Labor efficiency variance
(Actual hours - Standard hours) * Standard rate
(190164-187500)*15
$ 39,960.00
Unfavoravle
Standard Hours = 125000 seals *1.5 hours = 187500 hours
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.