Koontz Company manufactures a number of products. The standards relating to one
ID: 2526727 • 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.
7.60
17.60
35.10
The production superintendent was pleased when he saw this report and commented: “This $0.64 excess cost is well within the 4 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 17,500 units. Variable overhead cost is assigned to products on the basis of direct labor-hours. There were no beginning or ending inventories of materials.
Required:
1. Compute the following variances for May:
a. Materials price and quantity variances.
b. Labor rate and efficiency variances.
c. Variable overhead rate and efficiency variances.
2. How much of the $0.64 excess unit cost is traceable to each of the variances computed in (1) above.
3. How much of the $0.64 excess unit cost is traceable to apparent inefficient use of labor time?
1a. Compute the following variances for May, materials price and quantity variances.
1b. Compute the following variances for May, labor rate and efficiency variances.
1c. Compute the following variances for May, variable overhead rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
Show less
How much of the $0.64 excess unit cost is traceable to each of the variances computed in (1) above. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Round your answers to 2 decimal places.)
How much of the $0.64 excess unit cost is traceable to apparent inefficient use of labor time? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations. Round your final answers to 2 decimal places.)
Standard Cost per Unit Actual Cost per Unit Direct materials: Standard: 1.90 feet at $4.00 per foot $7.60
Actual: 1.85 feet at $4.40 per foot $ 8.14 Direct labor: Standard: 1.10 hours at $16.00 per hour17.60
Actual: 1.15 hours at $15.40 per hour 17.71 Variable overhead: Standard: 1.10 hours at $9.00 per hour 9.90 Actual: 1.15 hours at $8.60 per hour 9.89 Total cost per unit $35.10
$ 35.74 Excess of actual cost over standard cost per unit $ 0.64Explanation / Answer
1a
Material price variance = (Actual quantity) * (Standard price - Actual price) = (17500 * 1.85) * (4.00-4.40) = -$12,950
i.e. $12,950 unfavourable
Material quantity variance = Standard price * (Standard quantity - Actual quantity) = 4.00 * (17500*1.90 - 17500*1.85) = $3,500 favourable
1b
Labor rate variance = Actual hours * (Standard rate - Actual rate) = (17500*1.15) * ( 16.00 - 15.40) = $12,075 favourable
Labor efficience variance = Standard rate * (Standard hours - Actual hours) = 16.00 * (17500*1.10 - 17500*1.15) = -$14,000 i.e. $14,000 unfavourable
1c
Variable overhead rate variance = Actual hours * (Standard rate - Actual rate) = (17500*1.15) * (9.00 - 8.60) = $8,050 favourable
Variable overhead efficiency variance = Standard rate * (Standard hours - Actual hours) = 9.00 * (17500*1.1 - 17500*1.15) = -$7,875 i.e. unfavourable
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.