Variance Company produces Chemical Y. It budgeted to produce 10,000 gallons of C
ID: 2542224 • Letter: V
Question
Variance Company produces Chemical Y. It budgeted to produce 10,000 gallons of Chemical Y in fiscal year 2006. It actually produced 11,000 gallons. The production process for Chemical Y has two principal ingredients, Mystery Material M and labor. To produce 1 gallon of Chemical Y under budget requires 10 gallons of Mystery Material M @ $3/gallon and .5 labor hours @$20/labor hour. During 2006, it spent $346,500 to purchase 99,000 gallons of Mystery Material M that Variance Company used in production. Its actual total labor costs were $115,000 and it used 5,000 hours of labor
What is the labor volume variance?
A) $15,000 B) $10,000 C) $5,000 D) $500
5. What is the labor efficiency variance?
A) $15,000 B) $10,000 C) $5,000 D) $500
What is the flexible budget variance for mystery material M for the year 2006?
A) $16,500 B) $30,000 C) $10,000 D) $46,500
8. What is the price variance for mystery material M for the year 2006?
A) $33,000 B) $30,000 C) $49,500 D) $50,000
Explanation / Answer
4)labor volume variance = SR [AH-SH]
= 20 [5000- (11000*.5)]
= 20[5000- 5500]
= 20 * -500
= - 10000 F
correct option is "B"
5)correct option is "B" -10000 [since labor volume variance also called labor efficiency variance]
6) Flexible Budget variance for Mystery material = Actual cost - [Actual units *SQ per unit *SR]
= 346500- [11000*10*3]
= 346500 - 330000
= 16500 U
Correct option is "A"
8)price variance for mystery material M = ACual cost -[AQ*SR]
= 346500 - [99000*3]
= 346500 -297000
= 49500 U
Correct option is "c"
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