00 point nalysis; the Impact of Variances on Unit Costs [LO8-4, LO8-5, LO8-6) Pe
ID: 2430232 • Letter: 0
Question
00 point nalysis; the Impact of Variances on Unit Costs [LO8-4, LO8-5, LO8-6) Perry Company manufacturesnu shown below, along with actual cosidMay The standards relating to one of these products are Cost per Unit Cost Direct materials Standard 1.80 feet at $1.80 per foot Actual: 1.75 feet at $2.20 per foot $ 324 s 3.85 Direct labor Standard: 0.90 hours at $19.00 per hour Actual: 0.95 hours at $18.40 per hour 17.10 Variable overhead 17.48 Standard: 0 90 hours at s6.40 per hour Actual 0.95 hours at $6.00 per hour 5.76 5.70 Total cost per unit Excess of achuol cost over standard cost per unt $0.93 e production superintendent was pleased when she saw this report and commented: "This $o 93 coss cost is wll within the 5 percent limt management has set for acceptable variances it's obwous thar 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. (Input all amounts as positive values. Indicate the effect for favorable, "Ufor unfavorable, and "None" for no effect of each variance by selecting (i.e? zero variance).) 3 Answer is complete but not entirely correct. Materiais quantity (8,400) OIF Materials price b. Labor tate and efficency variances (Input all amounts as positive values. Indicate the effect of each variance by selecting F for favorable, V for unfavorable, and "None" for no effect .e., zero variance) 0 Answer is complete but not entirely correct. 6,840 olu O O Type here to searchExplanation / Answer
Solution:
1.(a)
Material quantity variance
$ 1080
F
Material price variance
$ 8400
U
Working notes:
Material price variance=( Standard Price-Actual Price)*Actual quantity of materials used
= ($1.80/foot-$2.20/foot)*21000 feet=$ 8400( U)
Material quantity variance=(Standard quantity allowed for actual units-Actual quantity)*Standard price
=(21600 feet-21000 feet)*$1.80/feet=$ 1080 (F)
(b)
Labour efficiency variance
$ 11400
U
Labour rate variance
$ 6840
F
Working notes:
Labour Rate Variance=(standard rate/hour-actual rate /hour)* Actual hours
=( $19/hour-$18.40/hour)* 11400 hours=$ 6840(F)
Labour Efficiency Variance=(Standard hours for actual output-actual hours)*Standard rate/hour
=( 10800 hours-11400 hours)*$ 19/hour=11400( U)
(c )
Variable overhead efficiency variance
$ 3840
U
Variable overhead rate variance
$ 4560
F
Working Note:
Variable overhead rate variance=( standard overhead rate/hour-actual overhead rate /hour)* Actual hours
=( $6.40/hour-$ 6/hour)*11400 hours=$ 4560( F)
Variable overhead Efficiency Variance=( Standard hours for actual output-actual hours)*Standard overhead rate/hour
=(10800 hours-11400 hours)*$6.40/hour=$ 3840(U)
2.Given in the question that it is complete and correct.
3.
Excess of actual over standard cost
Per unit
$ 0.93
U
Less: Portion attributable to labour
Inefficiency
Labour Efficiency Variance
$ 0.95
U
Variable overhead efficiency variance
$ 0.32
U
$ 1.27
U
Portion due to other variances
$ 0.34
F
Working Notes:
Labour efficiency variance per unit=$ 11,400 U/12000 units=$ 0.95/unit (U)
Variable overheads efficiency variance per unit=$ 3840U/12000units=$ 0.32/unit(U)
Material quantity variance
$ 1080
F
Material price variance
$ 8400
U
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.