Koontz Company manufactures a number of products. The standards relating to one

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 Actual Cost per Cost per Direct materials: $3.24 Standard: 1.80 feet at $1.80 per foot Actual: 1.75 feet at $2.00 per foot s 3.50 Direct labor 14.40 Standard: 0.90 hours at $16.00 per hour Actual: 0.95 hours at $15.40 per hour 14.63 Variable overhead Standard: 0.90 hours at $4.00 per hour Actual: 0.95 hours at $3.60 per hour 3.60 3.42 $21.24 $21.55 $0.31 Total cost per unit Excess of actual cost over standard cost per unit The production superintendent was pleased when he saw this report and commented: "This $0.31 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 10,000 units. Variable overhoad 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. (Input all amounts as positive values. Indicate the effect of each variance by selecting "Ffor favorable, "U for unfavorable, and "None" for no effect (Le, zero variance).) Materials price variance Materials quantity variance b. Labor rate and efficiency variances. (input all amounts as positive values. Indicate the effect of each varlance by selecting "P" for favorable, "U" for unfavorable, and "None for no effect zero variance).) Labor rate variance Labor efficiency variance

Explanation / Answer

Actual Cost Standard Cost AQ x AP AQ x SP SQ x SP 17,500 x $2.00 17,500 x $1.80 18,000 x $1.80 $35,000 $31,500 $32,400 $3,500 $900 Direct materials price variance 3500 Unfavorable Direct materials quantity variance 900 Favorable Total direct materials variance $2,600 Unfavorable Actual Cost Standard Cost AH AR AH SR SH SR 9,500 $15.40 9,500 $16.00 9,000 $16.00 $146,300 $152,000 $144,000 $5,700 ($8,000) Direct labor rate variance 5700 Favorable Direct labor efficiency variance 8000 Unfavorable Total direct labor variance $2,300 Unfavorable Actual Cost Standard Cost AH AR AH SR SH SR 9,500 $3.60 9,500 $4.00 9,000 $4.00 $34,200 $38,000 $36,000 $3,800 ($2,000) Direct labor rate variance 3800 Favorable Direct labor efficiency variance 2000 Unfavorable Total direct labor variance $1,800 Favorable Materials: Quantity variance ($900 ÷ 10,000 units) $0.09 F Price variance ($3,500 ÷ 10,000 units) 0.35 U $0.26 U Labor: Efficiency variance ($8,000 ÷ 10,000 units) 0.80 U Rate variance ($5,700 ÷ 10,000 units) 0.57 F 0.23 U Variable overhead: Efficiency variance ($2,000 ÷ 10,000 units) 0.20 U Rate variance ($3,800 ÷ 10,000 units) 0.38 F 0.18 F Excess of actual over standard cost per unit $0.31 U Both the labor efficiency and variable overhead efficiency variances are affected by inefficient use of labor time. Excess of actual over standard cost per unit $0.31 U Less portion attributable to labor inefficiency: Labor efficiency variance 0.80 U Variable overhead efficiency variance 0.20 U 1.00 U Portion due to other variances $0.69 F

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