Comprehensive Problem 5 Part C: Note: This section is a continuation from Parts
ID: 2541471 • Letter: C
Question
Comprehensive Problem 5
Part C:
Note: This section is a continuation from Parts A and B of the comprehensive problem. Be sure you have completed Parts A and B before attempting Part C. You may have to refer back to data presented in Parts A and B as well as use answers from those parts when completing this section.
Genuine Spice Inc. began operations on January 1 of the current year. The company produces 8-ounce bottles of hand and body lotion called Eternal Beauty. The lotion is sold wholesale in 12-bottle cases for $100 per case. There is a selling commission of $20 per case. The January direct materials, direct labor, and factory overhead costs are as follows:
Part C—August Variance Analysis
During September of the current year, the controller was asked to perform variance analyses for August. The January operating data provided the standard prices, rates, times, and quantities per case. There were 1,500 actual cases produced during August, which was 250 more cases than planned at the beginning of the month. Actual data for August were as follows:
The prices of the materials were different than standard due to fluctuations in market prices. The standard quantity of materials used per case was an ideal standard. The Mixing Department used a higher grade labor classification during the month, thus causing the actual labor rate to exceed standard. The Filling Department used a lower grade labor classification during the month, thus causing the actual labor rate to be less than standard.
Required:
10. Determine the direct materials price and quantity variances for the three materials. Enter the costs in dollars and cents (carried to three decimal places when required). Enter all amounts as positive numbers.
Enter the standard price to two decimal places.
11. Determine the direct labor rate and time variances for the two departments. Do not round hours. Enter the costs in dollars and cents. Enter all amounts as positive numbers.
12. Determine the factory overhead controllable variance. Enter all amounts as positive numbers.
13. Determine the factory overhead volume variance. Round rate to two decimal places and round your final answer to two decimal places. Enter all amounts as positive numbers.
14. The production volume of cases was planned at the beginning of August. The variances compare the actual cost and the standard cost of for the month. Thus, the standard cost must be based on the units of actual production.
DIRECT MATERIALS CostBehavior Units
per Case Cost
per Unit Direct Materials
Cost per Case Cream base Variable 100 ozs. $0.02 $2.00 Natural oils Variable 30 ozs. 0.30 9.00 Bottle (8-oz.) Variable 12 bottles 0.50 6.00 $17.00 DIRECT LABOR Department Cost
Behavior Time
per Case Labor Rate
per Hour Direct Labor
Cost per Case Mixing Variable 20 min. $18.00 $6.00 Filling Variable 5 14.40 1.20 25 min. $7.20 FACTORY OVERHEAD Cost Behavior Total Cost Utilities Mixed $600 Facility lease Fixed 14,000 Equipment depreciation Fixed 4,300 Supplies Fixed 660 $19,560
Explanation / Answer
Answer
Direct Materials Price Variance:
Cream Base
Natural Oils
Bottles
Actual price
0.016
0.32
0.42
Standard price
0.02
0.3
0.5
Difference
-0.004
0.02
-0.08
Actual quantity (units)
153000
ozs.
46500
ozs.
18750
btls.
Direct materials price variance
$-612
$930
$-1500
Indicate if favorable or unfavorable
favourable
Unfavourable
Favourable
Direct Materials Quantity Variance:
Cream Base
Natural Oils
Bottles
Actual quantity
153000
ozs.
46500
ozs.
18750
btls.
Standard quantity
150000
45000
18000
Difference
3000
ozs.
1500
ozs.
750
btls.
Standard price
0.02
0.3
0.5
Direct materials quantity variance
$60
$450
$375
Indicate if favorable or unfavorable
Unfavourable
Unfavourable
Unfavourable
Direct Labor Rate Variance:
Mixing Department
Filling Department
Actual rate
18.2
14
Standard rate
18
14.4
Difference
0.2
-0.4
Actual time (hours)
487.5
140
Direct labor rate variance
$97.5
$-56
Indicate if favorable or unfavorable
Unfavourable
Favourable
Direct Labor Time Variance:
Mixing Department
Filling Department
Actual time (hours)
487.5
140
Standard time (hours)
500
125
Difference
-12.5
15
Standard rate
18
14.4
Direct labor time variance
$-225
$216
Indicate if favorable or unfavorable
Favourable
Unfavourable
ctual variable overhead
305
Variable overhead at standard cost
325
Factory overhead controllable variance
$-20
Indicate if favorable or unfavorable
Favourable
Normal volume (cases)
1600
Actual volume (cases)
1500
Difference
100
Fixed factory overhead rate
12.225
Factory overhead volume variance
$1222.5
Indicate if favorable or unfavorable
Unfavorable
Direct Materials Price Variance:
Cream Base
Natural Oils
Bottles
Actual price
0.016
0.32
0.42
Standard price
0.02
0.3
0.5
Difference
-0.004
0.02
-0.08
Actual quantity (units)
153000
ozs.
46500
ozs.
18750
btls.
Direct materials price variance
$-612
$930
$-1500
Indicate if favorable or unfavorable
favourable
Unfavourable
Favourable
Direct Materials Quantity Variance:
Cream Base
Natural Oils
Bottles
Actual quantity
153000
ozs.
46500
ozs.
18750
btls.
Standard quantity
150000
45000
18000
Difference
3000
ozs.
1500
ozs.
750
btls.
Standard price
0.02
0.3
0.5
Direct materials quantity variance
$60
$450
$375
Indicate if favorable or unfavorable
Unfavourable
Unfavourable
Unfavourable
Direct Labor Rate Variance:
Mixing Department
Filling Department
Actual rate
18.2
14
Standard rate
18
14.4
Difference
0.2
-0.4
Actual time (hours)
487.5
140
Direct labor rate variance
$97.5
$-56
Indicate if favorable or unfavorable
Unfavourable
Favourable
Direct Labor Time Variance:
Mixing Department
Filling Department
Actual time (hours)
487.5
140
Standard time (hours)
500
125
Difference
-12.5
15
Standard rate
18
14.4
Direct labor time variance
$-225
$216
Indicate if favorable or unfavorable
Favourable
Unfavourable
ctual variable overhead
305
Variable overhead at standard cost
325
Factory overhead controllable variance
$-20
Indicate if favorable or unfavorable
Favourable
Normal volume (cases)
1600
Actual volume (cases)
1500
Difference
100
Fixed factory overhead rate
12.225
Factory overhead volume variance
$1222.5
Indicate if favorable or unfavorable
Unfavorable
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