Koontz Company manufactures a number of products. The standards relating to one
ID: 2514257 • 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.
The production superintendent was pleased when he saw this report and commented: “This $0.08 excess cost is well within the 2 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 12,000 units. Variable overhead cost is assigned to products on the basis of direct labor-hours. There were no beginning or ending inventories of materials.
How much of the $0.08 excess unit cost is traceable to each of the variances computed in (1) above. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your answers to 2 decimal places.)
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.
Explanation / Answer
Answers
Actual DATA for
12000
units
Quantity (AQ)
Rate (AR)
Actual Cost
Direct Material
21600
$ 3.30
$ 71,280.00
Direct labor
11040
$ 17.50
$ 1,93,200.00
Variable Overhead
11040
$ 4.50
$ 49,680.00
Standard DATA for
12000
units
Quantity (SQ)
Rate (SR)
Standard Cost
Direct Material
21600
$ 3.00
$ 64,800.00
Direct labor
10800
$ 18.00
$ 1,94,400.00
Variable Overhead
10800
$ 5.00
$ 54,000.00
Material Price Variance
(
Standard Rate
-
Actual Rate
)
x
Actual Quantity
(
$ 3.00
-
$ 3.30
)
x
21600
-6480
Variance
6480
Unfavourable-U
Material Quantity Variance
(
Standard Quantity
-
Actual Quantity
)
x
Standard Rate
(
21600
-
21600
)
x
$ 3.00
0
Variance
0
Favourable-F
Material Spending Variance
(
Standard Cost
-
Actual Cost
)
(
$ 64,800.00
-
$ 71,280.00
)
-6480
Variance
6480
Unfavourable-U
Labor Rate Variance
(
Standard Rate
-
Actual Rate
)
x
Actual Labor Hours
(
$ 18.00
-
$ 17.50
)
x
11040
5520
Variance
5520
Favourable-F
Labour Efficiency Variance
(
Standard Hours
-
Actual Hours
)
x
Standard Rate
(
10800
-
11040
)
x
$ 18.00
-4320
Variance
4320
Unfavourable-U
Labor Spending Variance
(
Standard Cost
-
Actual Cost
)
(
$ 1,94,400.00
-
$ 1,93,200.00
)
1200
Variance
1200
Favourable-F
Variable Overhead Rate Variance
(
Standard Rate
-
Actual Rate
)
x
Actual Labor Hours
(
$ 5.00
-
$ 4.50
)
x
11040
5520
Variance
5520
Favourable-F
Variable Overhead Efficiency Variance
(
Standard Hours
-
Actual Hours
)
x
Standard Rate
(
10800
-
11040
)
x
$ 5.00
-1200
Variance
1200
Unfavourable-U
Variable Overhead Spending Variance
(
Standard Cost
-
Actual Cost
)
(
$ 54,000.00
-
$ 49,680.00
)
4320
Variance
4320
Favourable-F
Materials:
Price variance [6480U/12000]
0.54
U
Quantity variance [NIL]
0
None
0.54
U
Labor:
Rate variance [5520F/12000]
0.46
F
Efficiency variance [4320U/12000]
0.36
U
0.1
F
Variable overhead:
Rate variance [5520F/12000]
0.46
F
Efficiency variance [1200U/12000]
0.1
U
0.36
F
Excess of actual over standard cost per unit [0.54 – 0.1 – 0.36]
0.08
U
Actual DATA for
12000
units
Quantity (AQ)
Rate (AR)
Actual Cost
Direct Material
21600
$ 3.30
$ 71,280.00
Direct labor
11040
$ 17.50
$ 1,93,200.00
Variable Overhead
11040
$ 4.50
$ 49,680.00
Standard DATA for
12000
units
Quantity (SQ)
Rate (SR)
Standard Cost
Direct Material
21600
$ 3.00
$ 64,800.00
Direct labor
10800
$ 18.00
$ 1,94,400.00
Variable Overhead
10800
$ 5.00
$ 54,000.00
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