1. value: 12.00 points Barberry, Inc., manufactures a product called Fruta. The
ID: 2448806 • Letter: 1
Question
1.
value:
12.00 points
Barberry, Inc., manufactures a product called Fruta. The company uses a standard cost system and has established the following standards for one unit of Fruta:
The company produced 3,300 units during June.
There was no beginning inventory of materials; however, at the end of the month, 2,950 pounds of material remained in ending inventory.
The company employs 10 persons to work on the production of Fruta. During June, they worked an average of 190 hours at an average rate of $14.50 per hour.
Variable manufacturing overhead is assigned to Fruta on the basis of direct labor-hours. Variable manufacturing overhead costs during June totaled $4,200.
Compute the price and quantity variances.(Round your "price per pound" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
The materials were purchased from a new supplier who is anxious to enter into a long term purchase contract. Would you recommend that the company sign the contract?
Compute the rate and efficiency variances. (Round your "rate per hour" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
In the past, the 10 persons employed in the production of Fruta consisted of 4 senior workers and 6 assistants. During June, the company experimented with 5 senior workers and 5 assistants. Would you recommend that the new labor mix be continued?
Compute the variable overhead rate and efficiency variances.(Round your "rate per hour" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
Barberry, Inc., manufactures a product called Fruta. The company uses a standard cost system and has established the following standards for one unit of Fruta:
Explanation / Answer
1 For direct materials: a. Compute the price and quantity variances.(Round your "price per pound" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Material Price Variance = Standard Price - Actual Price X Actual Quantity Used Actual Price = Actual Cost/Actual Quantity Purchased = 6.7 Quantity Used = Purchases - Closing Inventory = 4650 Therefore, Material Price Variance = 1395 F Material Quantity Variance = Standard Quantity - Actual Quantity X Standard Price per unit Standard Quantity = 3300 X 1.2 3960 Therefore Material Quantity Variance = -4830 U b. The materials were purchased from a new supplier who is anxious to enter into a long term purchase contract. Would you recommend that the company sign the contract? Yes No No. The Company should not sign the contract since although the price of the material is lower than the standard, the quantity being used for production is quite high as compared to standard units required. 2 For labor employed in the production of Fruta: a. Compute the rate and efficiency variances. (Round your "rate per hour" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Labour Rate Variance = Standard Rate - Actual Rate X Actual No. of Hours worked Therefore, Labour Rate Variance = -950 U 190 hours average X 10 persons = 1900 hours Labour Efficiency Variance = Standard Hours - Actual Hours X Standard Rate per hour Standard Hours = 1980 Therefore, Labour Efficiency Variance = 1120 F b. In the past, the 10 persons employed in the production of Fruta consisted of 4 senior workers and 6 assistants. During June, the company experimented with 5 senior workers and 5 assistants. Would you recommend that the new labor mix be continued? Yes No Yes, the new labour mix can be continued since even if the rate is marginally higher as compared to standards, there is a better increase in efficiency owing to lesser number of hours being worked compared to standards. 3a. Compute the variable overhead rate and efficiency variances.(Round your "rate per hour" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Variable Overhead Rate Variance = Standard Rate - Actual Rate X Actual No. of hours worked Actual Rate = Variable Overheads/Actual No. of hours worked 2.21 per hour Therefore, Variable Overhead Rate Variance = 551 F Variance Overhead Efficiency Variance = Standard No of Hours - Actual No of Hours X Standard rate/hour Therefore, Variable Overhead Efficiency Variance = 200 F
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