Hat-1 manufactures baseball caps. The Business Faculty of University order 150 c
ID: 2454177 • Letter: H
Question
Hat-1 manufactures baseball caps. The Business Faculty of University order 150 caps for the Business students with UNIV imprinted on them. Hat-1 has the following set of standards for the manufacture of baseball caps.
DM: ½ yard of fabric per cap
$4.00 per yard of fabric
DL: 1 labor hour per cap
$11.00 per labor hour
After the caps were shipped, Hat-1 analyzed the actual data from production and discovered the following results.
DM: ¾ yard of fabric per cap
$2.85 per yard of fabric
DL: 1.4 labor hours per cap
$9.50 per labor hour
Questions:
1. Determine the DM and DL budgets.
2. Calculate the Quantity and Price Variances for each budget and indicate whether each is favorable or unfavorable.
3. Provide explanations for the variances.
Explanation / Answer
2)Direct material price variance = AQ (AP -SP)
= 3/4 (2.85 - 4)
= 3/4 * -1.15
= - .8625 (F) OR 129.375 (F) [150*.8625]
Quantity variance = SR (AQ-SQ)
= 4[ 3/4 - 1/2]
= 4 * [.75 - .50]
= 4 * .25
= 1 (U) or 150 (U) [150*1]
Labor rate variance = AH (AR-SR)
= 1.4 ( 9.50 - 11)
= 1.4 * - 1.50
= - 2.10 (F) OR -315 (F) [2.10*150]
Efficiency variance = SR (AH-SH)
= 11 [ 1.4 - 1]
= 11 * .4
= 4.4 (U) OR 660 [150*4.4]
3)The variance occurs due to difference between price and quantity of material used and allowed.
say in case of material actual quantity used per unit= 3/4 yards whereas standard quantity allowed = 1/2 yard per unit .
per unit cost Total cost of 150 caps Direct material 1/2 yard or .5 yard per cap $ 4 per yard .5*4 = 2 per unit 300 [150*2] Direct labor 1labor hour $ 11 per hour 11 *1 = 11 per unit 1650 [150*11]Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.