WQC Company manufactures and sells packaging machines. The company uses two main
ID: 2486524 • Letter: W
Question
WQC Company manufactures and sells packaging machines. The company uses two main direct cost categories, direct materials and direct labor costs. The allocation of variable manufacturing overhead is based on standard direct labor hours.
In the beginning of the year, the manager estimated 265,000 kg of direct materials and 100,000 direct labor hours (DLH) will be used. He also expected it will cost him $1,840,000 for direct labor, and $700,000 for variable manufacturing overhead based on the budgeted direct labor hours. According to the company's policy, the standard cost for direct materials was $15 per kilogram and the standard quantity was 5 kilograms per output unit.
WQC provided the following actual results for the year:
Actual materials used
275,000
kg
Actual direct labor hours
90,000
DLH
Actual direct labor wage
$18.60
per DLH
Actual material price
$14.75
per kg
Actual variable manufacturing overhead
$720,000
Actual output
52,000
units
What is the budgeted number of output units?
a.
45,000
b.
53,000
c.
62,000
d.
None of the above
What is the direct materials price variance?
$54,500 UNFAVORABLE
$54,500 FAVORABLE
$68,750 UNFAVORABLE
$68,750 FAVORABL
What is the direct materials efficiency variance?
$185,000 UNFAVORABLE
$185,000 FAVORABLE
$225,000 UNFAVORABLE
$225,000 FAVORABLE
What is the direct labor price variance?
a.
$18,000 UNFAVORABLE
b.
$18,000 FAVORABLE
c.
$21,000 UNFAVORABLE
d.
$21,000 FAVORABLE
What is the direct labor efficiency variance?
$149,283 UNFAVORABLE
$149,283 FAVORABLE
$125,000 UNFAVORABLE
$125,000 FAVORABLE
a.$54,500 UNFAVORABLE
b.$54,500 FAVORABLE
c.$68,750 UNFAVORABLE
d.$68,750 FAVORABL
Explanation / Answer
Answer:1
Budgeted number of output units = Budgeted direct material quantity/ Budgeted qty. per output unit
= 265000/5 = 53000 output units
Answer:2
Direct material price variance = AQ (SP - AP)
= 275000 units ( $15 - $14.75)
= 275000 units *0.25
= $68750 F
Answer:3
Direct material efficiency variance = SP (SQ - AQ)
= $15 [( 52000 actual units* 5 standard quantity allowed per unit) - 275000 units]
= $15 (260000 units - 275000 units)
= $15 * 15000 units
= $225000 U
Answer:4
Direct labor rate variance = AH (SR - AR)
=90000 DLH [( $1840000/100000 hrs.) - $18.60 ]
= 90000 DLH ( $18.40 - $18.60)
= 90000 DLH * $0.20
= $18000 U
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