Green River Inc. established the following standards for its principal product..
ID: 2472393 • Letter: G
Question
Green River Inc. established the following standards for its principal product.. kit to convert ordinary lawn mulching mowers: The standard variable overhead cost per conversion kit is $2. Traditionally, all overhead is applied on the basis of machine hours. Planned production and sales for the year was 5.000 conversion kits The planned selling price per kit is $50. Prepare the flexible manufacturing cost budget for the year's actual output. Calculate the material variances. Calculate the labor variances.Explanation / Answer
A. Flexible manufacturing cost budget for actual output:
B. Material price variance = ( Standard rate - Actual rate ) x Actual quantity purchased and used
Blades: ( $ 13 - $ 12.75 ) x 11,000 = $ 2,750 F
Adaptors: ( $ 6 - $ 6.10 ) x 5,300 = $ 530 U
Total material price variance = $ 2,750 F + $ 530 U = $ 2,220 F
Materials quantity variance = ( Standard quantity for actual output - Actual quantity used ) x Standard price per unit
Blades: ( 10,400 - 11,000) x $ 13 = $ 7,800 U
Adaptors: ( 5,200 - 5,300) x $ 6 = $ 600 U
Total materials quantity variance = $ 7,800 U + $ 600 U = $ 8,400 U
Total material cost variance = Materials price variance + Materials quantity variance = $ 2,220 F + $ 8,400 U = $ 6,180 U
C) Labor variances:
Labor rate variance = ( Standard rate per hour - Actual rate per hour ) x Actual hours worked
Grinding: ( $ 14 - $ 15 ) x 2,800 = $ 2,800 U
Finishing and testing : ( $ 12 - $ 12.25) x 3,700 = $ 925 U
Total labor rate variance = $ 2,800 U + $ 925 U = $ 3,725 U
Labor efficiency variance = ( Standard hours for actual output - Actual hours worked ) x Standard labor hour rate
Grinding: ( 2,600 - 2,800) x $ 14 = $ 2,800 U
Finishing and testing : ( 3,467 - 3,700) x $ 12 = $ 2,796 U
Total labor efficiency variance = $ 2,800 U + $ 2,796 U = $ 5,596 U
Total labor cost variances: Total labor rate variance + Total labor efficiency variance = $ 3,725 U + $ 5,596 U = $ 9,321 U
Activity level 5,200 units Elements of cost $ Direct material: 166,400 Direct labor 78,000 Manufacturing overheads: Variable 10,400 Fixed 14,000 24,400 Total manufacturing cost $ 268,800Related Questions
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