A company produces bird food. During April, itproduced147 batches of food, each

Question

A company produces bird food. During April, itproduced147 batches of food, each batch weighing 1,00 lbs. Toproduce this quantity of output, the company purchased and used148,450 lbs of direct material at a cost of $593,800. It alsoincurred direct labor costs of $17,600 for the 2,200 hours workedby employees on the food production crew. Manufacturingoverhead incurred at the food plant during April totaled $3,625, ofwhich $2,450 was considered fixed. The company's standardcost onformation for 1,000 lb batches of bird food is asfollows: Direct materials standardprice.................................         $4.20 per pound Standard quantity allowed perbatch........................            1,020 pounds Direct labor standardrate.......................................              $8.50per hour Standard hours allowed perbatch..........................           14 direct labor hours fixed overheadbudgeted.......................................           $2,800 per month Normal level ofproduction....................................           140 batches per month Variable overhead applicationrate........................            $ 9.00 per batch Fixed overhead applaication rate ( $2,800 /140bathces)........................................              20.00 per batch Total overhead applicationrate............................              429.00 per batch a. compute the materials price and quantity variances b. compute the labor rate and efficiency variances c. compute the manufacturing overhead spending and volumevariances A company produces bird food. During April, itproduced147 batches of food, each batch weighing 1,00 lbs. Toproduce this quantity of output, the company purchased and used148,450 lbs of direct material at a cost of $593,800. It alsoincurred direct labor costs of $17,600 for the 2,200 hours workedby employees on the food production crew. Manufacturingoverhead incurred at the food plant during April totaled $3,625, ofwhich $2,450 was considered fixed. The company's standardcost onformation for 1,000 lb batches of bird food is asfollows: Direct materials standardprice.................................         $4.20 per pound Standard quantity allowed perbatch........................            1,020 pounds Direct labor standardrate.......................................              $8.50per hour Standard hours allowed perbatch..........................           14 direct labor hours fixed overheadbudgeted.......................................           $2,800 per month Normal level ofproduction....................................           140 batches per month Variable overhead applicationrate........................            $ 9.00 per batch Fixed overhead applaication rate ( $2,800 /140bathces)........................................              20.00 per batch Total overhead applicationrate............................              429.00 per batch a. compute the materials price and quantity variances b. compute the labor rate and efficiency variances c. compute the manufacturing overhead spending and volumevariances

Explanation / Answer

a. compute the materials price and quantityvariances        Materils PriceVariance      =   (ActualQuantity x Standard Price) - (Actual Quantity x Actual Price)                                              =   (148,450x$4.20)   -   ($593,800)   =   $29,690F          Materils QuantityVariance  =   (Actual Quantity - StandardQuantity) x Standard Price Per Unit                                              =   (148,450 - (1020 x147))  x $4.20                                                =   (148,450 - 149,940) x$4.20      =      $6,258F b. compute the labor rate and efficiencyvariances      Labor RateVariance         =   (ActualRate   -   Standard Rate) x ActualHours                                               =  (($17,600 / 2,200) - $8.50) x 2,200hours    =   $1100 F           Laborefficiency Variance  =   (Standard Time -Actual Time) x Standard Rate                                                =    ((14x147)   -  2,200 )   x   $8.50      =      $1,207   U        c. compute the manufacturing overheadspending and volume variances           Variable Overhead SpendingVariance   =   Overhead Applied -Actual Variable overhead                                                                     =   (147x $9.00)   -   ($3625 -$2450)                                                                     =   $1,323   -   $1175      = $148 F         FixedOverhead SpendingVariance      =   $2800- $2,450   =   $310 F                    TotalOverhead SpendingVariance             $148F   +   $310F      =   $458              Note : This rate appears to bewrong ($9.00 + $20.00) = $29.00             Totaloverhead applicationrate            429.00 per batch                                                                              FixedOverhead SpendingVariance      =   $2800- $2,450   =   $310 F                    TotalOverhead SpendingVariance             $148F   +   $310F      =   $458              Note : This rate appears to bewrong ($9.00 + $20.00) = $29.00             Totaloverhead applicationrate            429.00 per batch                                            TotalOverhead SpendingVariance             $148F   +   $310F      =   $458              Note : This rate appears to bewrong ($9.00 + $20.00) = $29.00             Totaloverhead applicationrate            429.00 per batch                                                                     

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