Koontz Company manufactures a number of products. The standards relating to one
ID: 2446804 • 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.
The production superintendent was pleased when he saw this report and commented: “This $0.88 excess cost is well within the 4 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 15,500 units. Variable overhead cost is assigned to products on the basis of direct labor-hours. There were no beginning or ending inventories of materials.
Materials price and quantity variances. (Round your "price per foot" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
Labor rate and efficiency variances. (Round your "rate per hour" answers to 2 decimal places.Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance))
Variable overhead rate and efficiency variances. (Round your "rate per hour" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance))
How much of the $0.88 excess unit cost is traceable to each of the variances computed in (1) above. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your answers to 2 decimal places.)
How much of the $0.88 excess unit cost is traceable to apparent inefficient use of labor time? (Input all values as positive amounts. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round intermediate calculations. Round your final answers to 2 decimal places.)
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.
Explanation / Answer
1) a)Materials quantity variance = SP (AQ – SQ)
= $3.20 per foot (28675 feet – 29450 feet)
= $ 2480 F
Materials price variance = AQ (AP – SP)
= 28675 feet ($3.60 per foot – $3.20 per foot)
= $11470 U
*
15500 units × 1.90 feet per unit = 29450 feet
**
15500 units × 1.85 feet per unit = 28675 feet
b) Labor efficiency variance = SR (AH – SH)
= $19.00 per hour (16725 hours – 15500 hours)
= $ 23725 U
Labor rate variance = AH (AR – SR)
= 16725 hours ($18.40 per hour – $19.00 per hour)
= $10035 F
*
15500 units × 1.00 hours per unit = 15500 hours
**
15500 units × 1.05 hours per unit = 16725 hours
c)
Variable overhead efficiency variance = SR (AH – SH)
= $ 8.00 per hour (16725 hours – 15500 hours)
= $ 9800 U
Variable overhead rate variance = AH (AR – SR)
= 16725 hours ($7.60 per hour – $8.00 per hour)
= $ 6690 F
*
15500 units × 1.00 hours per unit = 15500 hours
**
15500 units × 1.05 hours per unit = 16725 hours
*
15500 units × 1.90 feet per unit = 29450 feet
**
15500 units × 1.85 feet per unit = 28675 feet
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