You recently accepted an accounting position with Wainright Industries, the manu

Question

You recently accepted an accounting position with Wainright Industries, the manufacturer of rophies. Since everyone gets a participation trophy nowadays, business is good! Earlier this week, the CFO liscussion on last month's variances. You prepared a detailed analysis, but just now your loser of asked you to attend this afternoon's executive committee meeting and lead a roommate, Karen, spilled coffee all over your computer and wiped out your entire hard drive. You only have a one-page hard copy printout, which contains the following information Standard Cost Card Direct materials, 6 pounds at $3 per pound Direct labor, 0.8 direct-labor hours at $15 per direct-labor hour Variable manufacturing overhead, 0.8 direct-labor hours at $3 per direct-labor hour Standard Cost Per Unit $18.00 $12.00 $2.40 $32.40 Total Variances Reported Price or Rate Quantity or Efficiency Standard Cost $405,000 $270,000 $54,000 $6,900 F $14,550 U $1,300 F $9,000 U $21,000 U 7 U Direct materials Direct labor Variable manufacturing overhead It's now 12:40pm and the executive committee meeting starts at 2:00pm. To avoid looking like a complete fool, you must generate the necessary backup data for the variances before the meeting begins. Without the backup data it will be impossible to lead any kind of meaningful discussion. 1. How many units were produced last year? (3pts) 2. How many pounds of direct material were used in production? (3pts) 3. What was the actual cost per pound of material? (3pts) 4. How many actual direct labor hours were worked during the period? (3pts) 5. What was the actual rate paid per direct labor hour? (3pts) 6. How much extra was the actual variable cost per unit than the standard cost per unit? (5pts

Explanation / Answer

1).No. of Units produced last year = Std cost for actual production/Std cost per unit
= 405000/18 = 22500 units

2). Direct material Qty Variance = (Std Qty for actual production - actual Qty) * Std rate
9000 U = (405000/3 - Actual Qty) * 3
3000 U = 135000 - Actual Qty
Actual Qty = 135000 + 3000 = 138000
So, 138000 pounds of material used in production.

3). Direct Material price variance = (std rate - Actual rate)*Actual Qty
6900 F = (3-Actual rate)*138000
6900/138000 = 3-Actual rate
0.05 = 3-Actual Rate,
Hence Actual rate is 3-0.05 = $2.95

4). Direct labour efficiency variance = (std hrs for actual production - actual hrs)*Std rate per hour
21000 U = (270000/15 - Actual hrs) * 15
21000/15 U = (18000 - Actual hrs)
-1400 = 18000 - Actual hrs
Hence Actual hrs are 18000+1400 = 19400 hrs

5).Direct labour rate variance = (Std rate - Actual rate)*Actual hrs
14550 U = (15-Actual rate) * 19400
14550/19400 U = 15- Actual rate
-0.75 = 15 - Actual rate
Hence Actual labour rate paid is 15+0.75 = 15.75 per hour

6). Variable overhead spending variance = Budgeted var. overhead for actual hrs - Actual ovehead
1300 F = (19400hrs * 3) - Actual overhead
1300 = 58200 - Actual overhead
Actual overhead = 58200-1300 = 56900
Actual variable cost per unit = 56900/22500 units = 2.528

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.