Koontz Company manufactures a number of products. The standards relating to one
ID: 2434277 • Letter: K
Question
Koontz Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for May Standard Cost per Actua1 Cost per Unit Unit Direct materials: Standard: 1.90 feet at $4.00 per foot $ 7.60 Actual: 1.85 feet at $4.40 per foot $ 8.14 Direct labor: Standard: 1.10 hours at $16.00 per hour 17.60 Actual: 1.15 hours at $15.40 per hour Variable overhead: 9.90 Standard: 1.10 hours at $9.00 per hour Actual: 1.15 hours at $8.60 per hour 9.89 Total cost per unit $35.10 $35.74 Excess of actual cost over standard cost per unit $0.64 The production superintendent was pleased when he saw this report and commented: "This $0.64 excess cost is well within the 4 percent limit management has set for acceptable variances. It's obvious that there's not much to worry about with this product." Actual production for the month was 17,500 units. Variable overhead cost is assigned to products on the basis of direct labor- hours. There were no beginning or ending inventories of materials Required: 1. Compute the following variances for May: a. Materials price and quantity variances b. Labor rate and efficiency variances c. Variable overhead rate and efficiency variancesExplanation / Answer
1)
Material price variance = AQ[AR-SR]
= 1.85[4.4-4]
= .74 U
Material quantity variance = SR[AQ-SQ]
= 4[1.85 - 1.9]
= .2 F
B)Labor rate variance = AH[AR-SR]
= 1.15[15.4-16]
= .69 F
Labor efficiency variance = SR[AH-SH]
= 16[1.15-1.1]
= .80 U
C)Variable overhead rate variance =AH[AR-SR]
= 1.15[8.6-9]
= .46 F
Variable overhead efficiency variance = SR[AH-SH]
= 9[1.15-1.1]
= .45 U
2)
3)
Material Price .74 U Efficiency .20 F .54U Labor Rate .69 F Efficiency .80 U .11 U Variable overhead Rate .46 F Efficiency .45 U .01 F Excess of actual over standard .64URelated Questions
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