Q5: Problem 10-13 Basic Variance Analysis; the Impact of Variances on Unit Costs
ID: 2566798 • Letter: Q
Question
Q5: Problem 10-13 Basic Variance Analysis; the Impact of Variances on Unit Costs [LO10-1, LO10-2, LO10-3]
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.
4.68
14.40
25.74
The production superintendent was pleased when he saw this report and commented: “This $0.44 excess cost is well within the 5 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 14,000 units. Variable overhead cost is assigned to products on the basis of direct labor-hours. There were no beginning or ending inventories of materials.
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 $0.44 excess unit cost is traceable to each of the variances computed in (1) above.
3. How much of the $0.44 excess unit cost is traceable to apparent inefficient use of labor time?
Standard Cost per Unit Actual Cost per Unit Direct materials: Standard: 1.80 feet at $2.60 per foot $4.68
Actual: 1.75 feet at $2.80 per foot $ 4.90 Direct labor: Standard: 0.90 hours at $16.00 per hour14.40
Actual: 0.95 hours at $15.40 per hour 14.63 Variable overhead: Standard: 0.90 hours at $7.40 per hour 6.66 Actual: 0.95 hours at $7.00 per hour 6.65 Total cost per unit $25.74
$ 26.18 Excess of actual cost over standard cost per unit $ 0.44 Requirea: 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 $0.44 excess unit cost is traceable to each of the variances computed in (1) above. 3. How much of the $0.44 excess unit cost is traceable to apparent inefficient use of labor time? Complete this question by entering your answers in the tabs below. Required1Required 2Required 3 How much of the $0.44 excess unit cost is traceable to apparent inefficient use of labor time? (Input all values as positive amounts. 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.) Show less Excess of actual over standard cost per unit Less portion attributable to labor inefficiency Labor efficiency variance Variable overhead efficiency variance Portion due to other variancesExplanation / Answer
1 Actual rate 2.80 per foot Direct material price variance = (Actual rate -Standard rate) * Actual quantity Direct material price variance = (2.80- 2.60) * 14000*1.75 4900 UnFavorable 2 Standard Material for actual production 14000*1.80 25,200 foot Direct material quantity variance= (Standard material for acual production -Actual material) *Standard rate Direct material quantity variance= (25200-24500)* 2.6 1820 Favorable 3 Actual rate 15.40 per hour Labor rate variance = (Standard rate -Actual rate) * Actual hours Labor rate variance = (16- 15.40 ) * 14000*.95 7980 Favorable 4 Standard labor hours for actual production 14000*.9 12,600 Hours Labor Effeciency variance= (Actual hours - Standard hours for acual production) *Standard rate Labor Effeciency variance= (13300 - 12600)* 16 11200 UnFavorable 5 Actual rate 7.00 per hour Variable overhead rate variance = (Standard rate - Actual rate) * Actual hours Variable overhead rate variance = (7.40 - 7.00 ) * 13300 5320 Favorable 6 Standard labor hours for actual production 14000*.9 12,600 Hours Variable OH Effeciency variance= (Actual hours - Standard hours for acual production) *Standard rate Variable OH Effeciency variance= (13300 - 12600)* 7.4 5180 UnFavorable
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.