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Safari File Edit View History Bookmarks Develop Window Help LON-CAPA FS15 11-1 | || | + Apple iCloud https s2lite.msu .edu/res/msu/convery/ACC%20202%20FS15%20and%20beyond /CH%2011%20Variance%20Analysis/FS15%2011-1.problem#17 Reader Twitter wikipedia Yahoo! News Popular www.buzzfeed.com LON-CAPA FS15 11-1 Direct Material Quantity Variance Formula | Analysis I Example ACC202, Fall 2015 Principles of Management Accounting Messages Courses Help Logout Connor Austin Sisco (Student -section: 011) Main Menu Contents Grades Course Contents »... » GRADED LON-CAPA Homework FS15 11-1 Timer Notes Evaluate Feedback Print Info FireFly manufactures hot air balloons and uses a standard costing system. FireFly allocates overhead based on the number of direct labor hours. The following are the company's cost and standards data: Standards: Direct material 20.0 yards per hot air balloon at $13.20 per yard Direct labor 6.0 hours per balloon at $10.60 per hour Variable MOH standard rate $4.40 per direct labor hour Predetermined fixed MOH standard rate $9.80 per direct labor hour Total budgeted fixed MOH cost $81,700 Actual cost and operating data from the most recent month follows: Purchased 43,440 yards at a total cost of $547,851 Used 39,000 yards in producing 2,500 balloons Actual direct labor cost of $92,642 for a total of 8,250 hours Actual variable MOH cost $44,602 Actual fixed MOH cost $86,300 Answer the following questions. Each question is worth 1 point. 1. Calculate the standard cost of one air balloon: $412.80 You are correct Your receipt no. is 157-8159 ie 2. Calculate direct material variances. Enter as a positive if favorable and negative if unfavorable a. Direct material price variance:-1750 OuExplanation / Answer
Answer:
S.No.
Questions
Answer
Reference
1
Calculate the standard cost of one air balloon
$412.80
Refer Note-1--- the table of Standard Cost data for one air balloon
2
Calculate direct material variance
a. Direct Material Price Variance
$25,557 (Favorable)
Note 3
b. Direct Material Quantity Variance
$145,200 (Favorable)
Note 4
3
Calculate Direct Labour Variance
a. Direct labour rate variance
-$5,192 (Unfavorable)
Note 5
b. Direct labour efficiency variance
$71,550 (favorable)
Note 6
4
Calculate variable manufacturing overhead variance
a. Variable MOH rate variance
-$8,302 (unfavorable)
Note 7
b. Variable MOH efficiency variance
$29,700 (favorable)
Note 8
5
Calculate fixed manufacturing overhead variance
a. Fixed overhead budget variance
-$4,600 (unfavorable)
Note 9
b. Fixed overhead volume variance
$65,300 (favorable)
Note 10
Working Notes:
Note-1: Standard Data of One Air Balloon
Particulars
Yards / hours per balloon
Rate
Amount
Direct Material
20 Yards
$13.20
$264.00
Direct Labour
6 hours
$10.60
$63.60
Variable MOH
6 hours
$4.40
$26.40
Predetermined Fixed MOH
6 hours
$9.80
$58.80
Standard Cost of One Air Balloon
$412.80
Total Budgeted Fixed MOH
$81,700
Note-2: Actual Cost/Data for producing 2,500 balloons
Particulars
Yards / hours
Rate
Amount
Actual Quantity Purchased
43,440 Yards
$547,851
Direct Material Consumed
39,000 Yards
$12.612
$491,868
Direct Labour
8,250 hours
$11.23
$92,642
Variable MOH
8,250 hours
$5.41
$44,602
Actual Fixed MOH
$86,300
Actual Direct Material cost per Yard = $547,851 / 43,440 = $12.6116 or $12.612
Note-3: Direct Material Price Variance
In this variance actual quantity means actual quantity of material PURCHASED. If in the question material purchase is not given, it is taken as equal to material consumed. But here material purchased quantity is given, so
Material Price Variance = Actual Quantity Purchased x Standard Price – Actual Quantity Purchased x Actual Price) = (43,440 x $13.20) - $547,851 = $573,408 - $547,851 = $25,557 (Favorable)
Note-4: Direct Material Quantity Variance
Direct Material Quantity Variance = Standard Price (Standard Quantity – Actual Quantity)
Here actual quantity means actual quantity of material USED.
Standard Quantity for producing 2,500 balloons = 20 Yards x 2,500 = 50,000 Yards
Direct Material Quantity Variance = $13.20 (50,000 – 39,000) = $145,200 (Favorable)
Note-5: Direct labour rate variance
Labour Rate Variance = (Actual Time x Standard Rate) – (Actual Time x Actual Rate) = (8250 x $10.60) - $92,642 = $87,450 - $92,642 = -$5,192 (Unfavorable)
Note-6: Direct labour efficiency variance
Labour Efficiency Variance (LEV) = Standard Rate (Standard hours for actual output – Actual Hours)
Standard Hours for actual output = 6 hours x 2,500 Balloons = 15,000 Hours
Labour Efficiency Variance (LEV) = $10.60 (15,000 – 8,250) = $71,550 (favorable)
Note-7: Variable MOH rate variance
Variable MOH rate variance = (Actual Hours x Standard Rate) – (Actual Hours x Actual Rate) = (8,250 x $4.40) - $44,602 = $36,300 - $44,602 = -$8,302 (unfavorable)
Note-8: Variable MOH efficiency variance
Variable MOH efficiency variance = Standard Rate (Standard Hours – Actual Hours) = $4.40 (15,000 – 8,250) = $29,700 (favorable)
Note-9: Fixed overhead budget variance
Fixed overhead budget variance = Budgeted Fixed Overheads – Actual Fixed Overheads = $81,700 - $86,300 = -$4,600 (unfavorable)
Note-10: Fixed overhead volume variance
Fixed overhead volume variance = Absorbed Overheads – Budgeted Overheads
= (Standard Rate x Standard Hours for actual output) – Budgeted Overheads
= ($9.80 x 15,000) – $81,700 = $147,000 - $81,700 = $65,300 (favorable)
S.No.
Questions
Answer
Reference
1
Calculate the standard cost of one air balloon
$412.80
Refer Note-1--- the table of Standard Cost data for one air balloon
2
Calculate direct material variance
a. Direct Material Price Variance
$25,557 (Favorable)
Note 3
b. Direct Material Quantity Variance
$145,200 (Favorable)
Note 4
3
Calculate Direct Labour Variance
a. Direct labour rate variance
-$5,192 (Unfavorable)
Note 5
b. Direct labour efficiency variance
$71,550 (favorable)
Note 6
4
Calculate variable manufacturing overhead variance
a. Variable MOH rate variance
-$8,302 (unfavorable)
Note 7
b. Variable MOH efficiency variance
$29,700 (favorable)
Note 8
5
Calculate fixed manufacturing overhead variance
a. Fixed overhead budget variance
-$4,600 (unfavorable)
Note 9
b. Fixed overhead volume variance
$65,300 (favorable)
Note 10
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