velue: 2.00 points Ironwood Company manufactures cast-iron barbeque cookware. Du

Question

velue: 2.00 points Ironwood Company manufactures cast-iron barbeque cookware. During a recent windstorm, it lost some of its cost accounting records. Ironwood has managed to reconstruct portions of its standard price (rate) system database but is still missing a few pieces of information Required: Use the information in the table to determine the unknown amounts. You may assume that Ironwood does not keep any raw materials on hand. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.) Direct Materials Direct Labor 1.10 hr Standard amount per pan produced Standard price (rate) Actual amount used per pan produced Actual price (rate) Actual Direct materials price variance Direct materials quantity variance Direct materials spending variance Direct labor rate variance Direct labor efficiency variance Direct labor spending variance 2.5 lb. S4.20 per lb.16.00 per hr 2.4 lb. 1.20 hr S4.10 per Ib. 15.50 per hr. number of pans produced and sold 2,500 pans 2,500 pans

Explanation / Answer

Solution:

Standard quantity of material for actual production = 2500*2.5 = 6250 lb

Actual quantity of material = 2500*2.4 = 6000 lb

Standard price of material = $4.20

Actual price of material = $4.10

Material price variance = (SP - AP) * AQ = ($4.20 - $4.10) * 6000 = $600 F

Material quantity variance = (SQ - AQ) * SR = (6250 - 6000) * $4.20 = $1,050 F

Material spending variance = Material price variance + Material quantity variance = $600 F + $1,050 F = $1,650 F

Standard hours of direct labor = 2500 * 1.10 = 2750 hours

Standard rate of direct labor = $16 per hour

Actual hours of direct labor = 2500*1.20 = 3000 hours

Actual rate of direct labor = $15.50 per hour

Direct labor rate variance = (SR - AR) * AH = ($16 - $15.50) * 3000 = $1,500 F

Direct labor efficiency variance = (SH - AH) * SR = (2750 - 3000) * $16 = $4,000 U

Direct labor spending variance = Direct labor rate variance + Direct labor efficiency variance

= $1,500 F + $4,000 U = $2,500 U

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