3 Harmon Household Products, Inc., manufactures a number of consumer items for g
ID: 2465072 • Letter: 3
Question
3
Harmon Household Products, Inc., manufactures a number of consumer items for general household use. One of these products, a chopping board, requires an expensive hardwood. During a recent month, the company manufactured 3,400 chopping boards using 2,584 board feet of hardwood. The hardwood cost the company $19,638.
The company’s standards for one chopping board are 0.68 board feet of hardwood, at a cost of $8.00 per board foot.
Required:
1.
According to the standards, what cost for wood should have been incurred to make 3,400 chopping blocks? How much greater or less is this than the cost that was incurred?
Number of chopping blocks
Number of board feet per chopping block
Standard board feet allowed
Standard cost per board foot
Total standard cost
Actual cost incurred
Standard cost
Spending variance—unfavorable
2.
Break down the difference computed in (1) above into a materials price variance and a materials quantity variance.(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
Materials price variance
F or U
Materials quantity variance
F or U
4
AirMeals, Inc., prepares in-flight meals for a number of major airlines. One of the company’s products is stuffed cannelloni with roasted pepper sauce, fresh baby corn, and spring salad. During the most recent week, the company prepared 3,500 of these meals using 950 direct labor-hours. The company paid these direct labor workers a total of $10,450 for this work, or $11.00 per hour.
According to the standard cost card for this meal, it should require 0.30 direct labor-hours at a cost of $9.50 per hour.
Required:
1.
According to the standards, what direct labor cost should have been incurred to prepare 3,500 meals? How much does this differ from the actual direct labor cost?
Number of meals prepared
Standard direct labor-hours per meal
Total direct labor-hours allowed
Standard direct labor cost per hour
Total standard direct labor cost
Actual cost incurred
Standard direct labor cost
Spending variance—unfavorable
2.
Break down the difference computed in (1) above into a labor rate variance and a labor efficiency variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
Labor rate variance
F or U
Labor efficiency variance
F or U
rev: 08_14_2013_QC_ 33806, 11_25_2013_QC_41315
5
Order Up, Inc., provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Order Up, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor-hours.
In the most recent month, 120,000 items were shipped to customers using 4,100 direct labor-hours. The company incurred a total of $11,480 in variable overhead costs.
According to the company’s standards, 0.03 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $2.85 per direct labor-hour.
Required:
1.
According to the standards, what variable overhead cost should have been incurred to fill the orders for the 120,000 items? How much does this differ from the actual variable overhead cost?
Number of items shipped
Standard direct labor-hours per item
Total direct labor-hours allowed
Standard variable overhead cost per hour
Total standard variable overhead cost
Actual variable overhead cost incurred
Standard variable overhead cost
Spending variance—Unfavorable
2.
Break down the difference computed in (1) above into a variable overhead rate variance and a variable overhead efficiency variance. (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
F or U
Variable overhead efficiency variance
F or U
Harmon Household Products, Inc., manufactures a number of consumer items for general household use. One of these products, a chopping board, requires an expensive hardwood. During a recent month, the company manufactured 3,400 chopping boards using 2,584 board feet of hardwood. The hardwood cost the company $19,638.
Explanation / Answer
Answer 3 Actual Chooping Board Manufactured 3400 Actual Hardboard Used - In Board Feet 2584 Actual Cost $19,638 Standard Hardboard Used for Chopping Board 0.68 Stanxdard Cost per Board Foot $8 Answer 3. (1) Number of Chopping Blocks 3400 Number of Board Feet per Chopping Block 0.68 Standard board feet allowed 2312 Total Standard Cost $18,496 Actual Cost Incurred $19,638 Standard Cost $18,496 Spending Variance - favourable $1,142 Answer 3. (2) Material Price Variance = (Actual Price - Standard Price) X Actual Quantity Material Price Variance = (7.60 - 8 ) X 2584 = $1034 (Unfavourable) Material quantity Variance = (Actual Qty - Standard quantity) X Standard Cost Material quantity Variance = (2584 - 2312) X $8 = $2176 (Favourable) Answer 4 Actual Meals Prepared 3500 Actual Direct Labour Hrs 950 Actual Cost $10,450 Actual Labour Cost per Hour $11 Standard Labour Hr per Meal 0.3 Standard Labour Cost per hr $9.50 Answer 4. (1) No. Of Meals Prepared 3500 Standard Direct Labour Hr per Meal 0.3 Total Direct Labour Hrs Allowed 1050 Standard Labour Cost per hr $9.50 Total Standard Direct Labour Cost $9,975 Actual Cost Incurred $10,450 Standard Direct Labour cost $9,975 Spending Variance - favourable $475 Answer 4. (2) Labour Rate Variance = (Actual Rate - Standard Rate) X Actual Hrs Worked Labour Rate Variance = ($11 - $9.50) X 950 = $1425 (Favourable) Labour Efficiency Variance = (Actual hours - Standard hours) x Standard rate Labour Efficiency Variance = (950 - 1050) X 9.50 = $950 (Unfavourable) Answer 5 Actual Qty Shipped 120000 Actual Direct Labour Hrs 4100 Actual Variable Overhead Cost $11,480 Actual Variable Overhead per lab Hr 2.80 Standard Labour Hr per unit 0.03 Standard Variable Overhead Rate per Labour hrs $2.85 Answer 5 (1) No. Of items Shipped 120000 Standard Direct Labour Hr per item 0.03 Total Direct Labour Hrs Allowed 3600 Standard Variable Overhead Cost per hr $2.85 Total Standard Variable Cost $10,260 Actual Variable Overhead Cost Incurred $11,480 Standard Direct Labour cost $10,260 Spending Variance - favourable $1,220 Answer 5 (2) Variable Overhead Rate Variance = Actual hours x (Actual overhead rate - standard overhead rate) Variable Overhead Rate Variance = 4100 x (2.80 -2.85) = $205 (Unfavourable) Variable Overhead Efficiency Variance = (Actual hours - Standard hours) x Standard rate Variable Overhead Efficiency Variance = (4100 - 3600) x 2.85 = $1425 (Favourable)
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