Koontz Company manufactures a number of products. The standards relating to one
ID: 2577483 • 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. Standard Cost per Actual Cost per Unit Unit Direct materials Standard: 1.80 feet at $2.60 per foot Actual: 1.75 feet at $2.80 per foot $ 4.68 $ 4.9 Direct labor: Standard : .9 hours at $16 . per hour 14·40 Actual: .95 hours at $15.4 per hour 14.63 Variable overhead: Standard: .9 hours at $7.4 per hour 6.66 Actual: .95 hours at $7. per hour 6.65 Total cost per unit $25.74 $26.18 Excess of actual cost over standard cost per unit $0.44 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 variancesExplanation / Answer
Actual Production
14000
units
1.
Direct Material Variances
Price Variance
Actual Quantity (Actual Price - Standard Price)
= 14000*1.75 (2.8 - 2.6)
4900
Unfavourable
Quantity Variance
Standard price ( Actual Quantity - Standard Quantity )
= 2.6 (14000*1.75 - 14000*1.8)
1820
Favourable
Direct Labour Variance
Rate Variance
Actual Quantity ( Actual Rate - Standard Rate)
= 14000*0.95 ( 15.4 - 16)
7980
Favourable
Efficiency Variance
Standard Rate ( Actual Hours - Standard Hours)
= 16 ( 14000*0.95 - 14000*0.90)
11200
Unfavourable
Variable Overhead Variance
Rate Variance
Actual Quantity ( Actual Rate - Standard Rate)
= 14000*0.95 ( 7 - 7.4)
5320
Favourable
Efficiency Variance
Standard Rate ( Actual Hours - Standard Hours)
= 7.4 ( 14000*0.95 - 14000*0.90)
5180
Unfavourable
2. Attributable in excess of $0.44 per unit
Attributable
Materials:
Price Variance
4900
Unfavourable
1418.42
Quantity Variance
1820
Favourable
Labor:
Rate Variance
7980
Favourable
Efficiency Variance
11200
Unfavourable
3242.11
Variable Overhead:
Rate Variance
5320
Favourable
Efficiency Variance
5180
Unfavourable
1499.47
Actual Production
14000
units
1.
Direct Material Variances
Price Variance
Actual Quantity (Actual Price - Standard Price)
= 14000*1.75 (2.8 - 2.6)
4900
Unfavourable
Quantity Variance
Standard price ( Actual Quantity - Standard Quantity )
= 2.6 (14000*1.75 - 14000*1.8)
1820
Favourable
Direct Labour Variance
Rate Variance
Actual Quantity ( Actual Rate - Standard Rate)
= 14000*0.95 ( 15.4 - 16)
7980
Favourable
Efficiency Variance
Standard Rate ( Actual Hours - Standard Hours)
= 16 ( 14000*0.95 - 14000*0.90)
11200
Unfavourable
Variable Overhead Variance
Rate Variance
Actual Quantity ( Actual Rate - Standard Rate)
= 14000*0.95 ( 7 - 7.4)
5320
Favourable
Efficiency Variance
Standard Rate ( Actual Hours - Standard Hours)
= 7.4 ( 14000*0.95 - 14000*0.90)
5180
Unfavourable
2. Attributable in excess of $0.44 per unit
Attributable
Materials:
Price Variance
4900
Unfavourable
1418.42
Quantity Variance
1820
Favourable
Labor:
Rate Variance
7980
Favourable
Efficiency Variance
11200
Unfavourable
3242.11
Variable Overhead:
Rate Variance
5320
Favourable
Efficiency Variance
5180
Unfavourable
1499.47
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