A company has asked you to perform a basic variance analysis to give them more i
ID: 2470740 • Letter: A
Question
A company has asked you to perform a basic variance analysis to give them more information.
Use the following information to answer the board’s questions:
Budgeted
Actual
Sales Information
# of analyses sold
500
450
Sales Price/analysis
$15,000
$15,750
DL Information
Hours Required/project
Junior Engineer
100
105
Senior Engineer
50
55
Partner
24
26
Wage/Hr
Junior Engineer
$20
$22
Senior Engineer
$50
$45
Partner
$75
$80
Variable Manufacturing OH Information
Driver Usage/project
Data Gathering
104
105
Analysis
125
100
POHR/Driver
Data Gathering
$10.48
Analysis
$15.62
Actual variable manufacturing overhead costs for the new line during the period were $650,000 for the data gathering department and $700,000 for the analysis department.
Assignment:
1. Identify and summarize the problem or issue: What is the fundamental or underlying issue (or issues) in this problem? Explain.
2. What are the Labor Rate and Efficiency variances for the new line? You will need to examine each level of employee independently and report the total variances for all employees.
3. What are the Variable Manufacturing Overhead Spending and Efficiency variances for the new line? You will need to examine each department separately and report the total variances for both departments.
4. What are the Sales Price and Sales Volume Variances for the new line?
Budgeted
Actual
Sales Information
# of analyses sold
500
450
Sales Price/analysis
$15,000
$15,750
DL Information
Hours Required/project
Junior Engineer
100
105
Senior Engineer
50
55
Partner
24
26
Wage/Hr
Junior Engineer
$20
$22
Senior Engineer
$50
$45
Partner
$75
$80
Variable Manufacturing OH Information
Driver Usage/project
Data Gathering
104
105
Analysis
125
100
POHR/Driver
Data Gathering
$10.48
Analysis
$15.62
Explanation / Answer
Direct labour rate variance (Standard rate- Actual rate)*Actual hours Junior enginner ((20-22)*105)*450 94,500 U - Senoir Enginner ((50-45)*55)*450 123,750 F Partner ((24-26)*80)*450 72000 U Total 42,750 U Labour Efficiency Variance (Standard Hours-Actual Hours)*Standard rate Junior enginner ((100-105)*20)*450 45,000 U Senoir Enginner ((50-55)*50)*450 112,500 U Partner ((24-26)*75)*450 67500 U Total 225,000 U Variable Overhead Spending variance Data gathering (450*104*10.48-650000) = 159536 U Analysis (450*125*15.62-700000) = 178625 F Total 19089 F Variable Overhead Efficiency variance Data gathering (104-105)*450*10.48 = 4716 U Analysis (125-100)*450*15.62 = 175725 F Total 171009 F Sale price Variance (15750-15000)*450 337,500 F Sale Volume Variance (450-500)*15000 = 750,000 A Total 412,500 A
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