Koontz Company manufactures a number of products. The standards relating to one
ID: 2516083 • 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 $0.26 excess cost is well within the 2 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 10,000 units. Variable overhead cost is assigned to products on the basis of direct labor-hours. There were no beginning or ending inventories of materials.
Required:
1. Compute the following variances for May:
a. Materials price and quantity variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)
b. Labor rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)
c. Variable overhead rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)
2. How much of the $0.26 excess unit cost is traceable to each of the variances computed in (1) above. (Input all amounts as positive values. 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.)
3. How much of the $0.26 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.)
Standard Cost per Unit Actual Cost per Unit Direct materials: Standard: 1.80 feet at $2.80 per foot $ 5.04 Actual: 1.75 feet at $3.00 per foot $ 5.25 Direct labor: Standard: 0.90 hours at $16.00 per hour 14.40 Actual: 0.95 hours at $15.40 per hour 14.63 Variable overhead: Standard: 0.90 hours at $4.00 per hour 3.60 Actual: 0.95 hours at $3.60 per hour 3.42 Total cost per unit $ 23.04 $ 23.30 Excess of actual cost over standard cost per unit $ 0.26Explanation / Answer
Answer
Actual DATA for
10000
units
Quantity (AQ)
Rate (AR)
Actual Cost
Direct Material
17500
$ 3.00
$ 52,500.00
Direct labor
9500
$ 15.40
$ 1,46,300.00
Variable Overhead
9500
$ 3.60
$ 34,200.00
Standard DATA for
10000
units
Quantity (SQ)
Rate (SR)
Standard Cost
Direct Material
18000
$ 2.80
$ 50,400.00
Direct labor
9000
$ 16.00
$ 1,44,000.00
Variable Overhead
9000
$ 4.00
$ 36,000.00
Material Price Variance
(
Standard Rate
-
Actual Rate
)
x
Actual Quatity
(
$ 2.80
-
$ 3.00
)
x
17500
-3500
Variance
3500
Unfavourable-U
Material Quantity Variance
(
Standard Quantity
-
Actual Quantity
)
x
Standard Rate
(
18000
-
17500
)
x
$ 2.80
1400
Variance
1400
Favourable-F
Material Spending Variance
(
Standard Cost
-
Actual Cost
)
(
$ 50,400.00
-
$ 52,500.00
)
-2100
Variance
2100
Unfavourable-U
Labor Rate Variance
(
Standard Rate
-
Actual Rate
)
x
Actual Labor Hours
(
$ 16.00
-
$ 15.40
)
x
9500
5700
Variance
5700
Favourable-F
Labour Efficiency Variance
(
Standard Hours
-
Actual Hours
)
x
Standard Rate
(
9000
-
9500
)
x
$ 16.00
-8000
Variance
8000
Unfavourable-U
Labor Spending Variance
(
Standard Cost
-
Actual Cost
)
(
$ 1,44,000.00
-
$ 1,46,300.00
)
-2300
Variance
2300
Unfavourable-U
Variable Overhead Rate Variance
(
Standard Rate
-
Actual Rate
)
x
Actual Labor Hours
(
$ 4.00
-
$ 3.60
)
x
9500
3800
Variance
3800
Favourable-F
Variable Overhead Efficiency Variance
(
Standard Hours
-
Actual Hours
)
x
Standard Rate
(
9000
-
9500
)
x
$ 4.00
-2000
Variance
2000
Unfavourable-U
Variable Overhead Spending Variance
(
Standard Cost
-
Actual Cost
)
(
$ 36,000.00
-
$ 34,200.00
)
1800
Variance
1800
Favourable-F
Actual DATA for
10000
units
Quantity (AQ)
Rate (AR)
Actual Cost
Direct Material
17500
$ 3.00
$ 52,500.00
Direct labor
9500
$ 15.40
$ 1,46,300.00
Variable Overhead
9500
$ 3.60
$ 34,200.00
Standard DATA for
10000
units
Quantity (SQ)
Rate (SR)
Standard Cost
Direct Material
18000
$ 2.80
$ 50,400.00
Direct labor
9000
$ 16.00
$ 1,44,000.00
Variable Overhead
9000
$ 4.00
$ 36,000.00
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