Please refer to the standard unit data for the Wolverine Company of Michigan fou
ID: 2542328 • Letter: P
Question
Please refer to the standard unit data for the Wolverine Company of Michigan found below. From the data provided, determine the following:
Direct materials price variance (based on materials used)
Direct materials usage variance
Direct labor variance
Direct labor efficiency variance
Use these sources to define each variance category and how data for it is commonly collected. For each variance category for this specific case, discuss how you computed the value and explain its use in evaluating operational results. From your computational results, characterize whether the variances are favorable to the company or unfavorable. In this case, which two categories require management’s attention as a priority? Support your view. (Please provide references as well). It should be a 2-3 page answer. (I saw an answer here but there is no explanation http://www.chegg.com/homework-help/questions-and-answers/paper-please-discuss-following-case-study-explain-approach-problem-support-approach-refere-q24093352?trackid=36fc5c07&strackid=577e8dff&autosuggest=1&ii=1&uqry=Please refer to the standard unit data for the Wolverine Company of Michigan found here. From the data provided, determine the following:&event=click_submit)
Normal volume per month is 40,000 direct labor hours. Wolverine's January 2014 budget was based on normal
volume. During January, Wolverine produced 7,800 units with records indicating the data following:
Actual:
The Wolverine Company Standards:
Direct materials purchased
25,000 lbs @ $3.60
Direct Materials (2 lbs @ $3.50 per lb.)
$7.00
Direct materials used
23,100 lbs
Direct Labor (4 hours @ $6.50 per hour)
$26.00
Direct labor
40,100 hours @ $6.30
STANDARD COST PER UNIT
$33.00
(excluding overhead)
Normal volume per month is 40,000 direct labor hours. Wolverine's January 2014 budget was based on normal
volume. During January, Wolverine produced 7,800 units with records indicating the data following:
Actual:
The Wolverine Company Standards:
Direct materials purchased
25,000 lbs @ $3.60
Direct Materials (2 lbs @ $3.50 per lb.)
$7.00
Direct materials used
23,100 lbs
Direct Labor (4 hours @ $6.50 per hour)
$26.00
Direct labor
40,100 hours @ $6.30
STANDARD COST PER UNIT
$33.00
(excluding overhead)
Explanation / Answer
Direct materials price variance (based on materials used)
= Actual Quantity used (Standard price - Actual price)
= 23100 (3.50 - 3.60)
= 2310 (U)
Direct materials usage variance
= Standard price (Standard Quantity - Actual quantity)
= 3.50 (7800 * 2 lbs - 23100 lbs)
= 3.50 (15600 - 23100)
= 26250 (U)
Direct labor rate variance
= Actual hour (Standard rate - Actual rate)
= 40100 (6.50 - 6.30)
= 8020 (F)
Direct labor efficiency variance
= Standard rate (Standard hour - Actual hour)
= 6.50 (7800 * 4 hrs - 40100 hrs)
= 6.50 (31200 - 40100)
= 57850 (U)
In this case, which two categories require management’s attention as a priority?
Direct Material usage variance and direct labour efficiency variance are required management's attention. Both are unfavourable with big amount.
Direct Material price variance indicate the difference between standard price set by the management and the actual purchase price.
Direct Material usage variance indicate the difference between standard usage set by the management and the actual material used during production. The difference is may be due to low standard set or losses of material due to inefficiency.
Direct Labour rate variance indicate the difference between standard labour rate set by the management and the actual Labour rate.
Direct Labour efficiency variance indicate the difference between standard labour hour set by the management and the actual labour hours used during production. The difference is may be due to low standard set or idel time.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.