explain their Problem 8-20B Basic Variance Analysis; the Impact of Variances on
ID: 2430584 • Letter: E
Question
explain their Problem 8-20B Basic Variance Analysis; the Impact of Variances on Unit Costs [LO8-4, LO8-5, LO8-6 Learning Objective: 08- 05 Compute the direct labor rate and efficiency variances and explan their significance Problem 8-20B Basic Variance Analysis; the Impact of Variances on Unit Costs [L084, LO8-5, LO8-6 Perry Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for May Cost per Unit Actual Cost per Unit Direct materials: Standard: 1.80 feet at $1.80 per foot Actual: 1.75 feet at $2.20 per foot 3.24 s 3.85 Direct labor 17.10 Standard: 0.90 hours at $19.00 per hour Actual: 0.95 hours at $18.40 per hour 17.48 Variable overhead: 5.76 Standard: 0.90 hours at $6.40 per hour Actual: 0.95 hours at $6.00 per hour 5.70 Total cost per unit $26.10 $27.03 Excess of actual cost over standard cost per unit $0.93 The production superintendent was pleased when she saw this report and commented: "This $0.93 excess cost is wel 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 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 of each variance by selectingP" for favorable, U for untavorable, and None for no effecet (i.e, zero variance).)Explanation / Answer
1 (a).
When inventory levels are unchanged ,production level and sales levels are same.
Quantity Produced=Quantity Sold
Quantity Produced +Beginning Inventory=Quantity Sold+ Ending Inventory
If Inventory Level is unchanged, Beginning Inventory=Ending Inventory.
Hence,
Quantity Produced=Quantity Sold
(b).
Actual Production =12000 units
Planning Budget =90% of actual
Units Planned=0.9*12000=10800
(c). Sales price per unit=$45
Planning Budget revenue=$45*10800= $ 486,000
.(d)Flexible Budget revenue=$45*12000= $ 540,000
(e)Budget Report not provided
(f)If flexible budget represents budgeted revenue of actual units sold, actual revenue may differ from budgeted revenue due to difference in actual price from the budgeted price. Second reason may be due to sales discounts.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.