Koontz Company manufactures a number of products. The standards relating to one
ID: 2584165 • 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 $3.00 per foot Actual: 1.80 feet at $3.30 per foot $ 5.40 $ 5.94 Direct labor: 16.20 Standard: 0.90 hours at $18.00 per hour Actual: 0.92 hours at $17.50 per hour 16.10 Variable overhead: 4.50 Standard: 0.90 hours at $5.00 per hour Actual: 0.92 hours at $4.50 per hour 4.14 Total cost per unit $26.10 $26.18 Excess of actual cost over standard cost per unit $0.08 The production superintendent was pleased when he saw this report and commented: "This $0.08 excess cost is well within the2 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 12,000 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 $0.08 excess unit cost is traceable to each of the variances computed in (1) above 3. How much of the $0.08 excess unit cost is traceable to apparent inefficient use of labor time?Explanation / Answer
1.a
C. Variable o/h rate per hour is $5 per labor hour
3. $6,480 or $,36 per unit is attributable to apparent inefficient use if labor time
Standard Quantity 1.8*18,000 = 32,400 Actual quantity 1.8*18.000=32,400 Actual price 3.3 Standardprice 3 Direct materials price variance = Actual Quantity * (Actual price - Standard price) Direct materials price variance =9,720 Fav variance Direct materials quantity variance Standard price * ( Actual quantity - Standard quantity) =3*(1.8-1.8) 0Related Questions
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