I dont want images of the answer. Please solve here or paste the excel working h
ID: 2545050 • Letter: I
Question
I dont want images of the answer. Please solve here or paste the excel working here and not the PNG images. Thanks
Potter Company – Variance Analysis
"That’s Great! Not only did our salespeople do a good job in meeting the sales budget this year, but our production people did a good job controlling costs as well," said Kimberly Donn, president of Potter Company. "Our $18,300 overall manufacturing cost variance is only 1.2% of the $1,536,000 budgeted cost of products made during the year. That's well within the 3% parameter set by management for acceptable variances. It looks like everyone will be in line for a bonus this year."
The company produces and sells a single product. The budgeted cost per product is as follows:
Direct materials, 2 feet at $8.45 per foot
$16.90
Direct labor, 1.4 direct labor hours at $16 per DLH
22.40
Variable OH, 1.4 direct labor hours at $2.50 per DLH
3.50
Fixed OH, 1.4 direct labor hours at $6 per DLH
8.40
Standard cost per unit
$51.20
The following additional information is available for the year just completed:
The company manufactured 30,000 units of product during the year
A total of 64,000 feet of material was purchased during the year at a cost of $8.55 per All of this material was used to manufacture the 30,000 units. There were no beginning or ending inventories for the year.
The company worked 43,500 direct labor hours during the year at a direct labor cost of $15.80 per
Overhead is applied to costs on the basis of budgeted direct-labor Data relating to manufacturing overhead costs follow:
Denominator activity level (DLH)
35,000
Budgeted fixed OH (from the flexible budget)
$210,000
Actual variable overhead costs incurred
$108,000
Actual fixed overhead costs incurred
$211,800
Requirements (show your work for partial credit):
Compute the direct materials price and efficiency variances for the year
Compute the direct labor price and efficiency variances for the year
Compute the variable overhead spending and efficiency variances for the year
Compute the fixed overhead spending and production-volume variances for the year
Total the variances you have computed, and compare the net amount with the $18,300 mentioned by Donn. Do you agree that bonuses should be given to everyone for good cost control during the year? Explain
Direct materials, 2 feet at $8.45 per foot
$16.90
Direct labor, 1.4 direct labor hours at $16 per DLH
22.40
Variable OH, 1.4 direct labor hours at $2.50 per DLH
3.50
Fixed OH, 1.4 direct labor hours at $6 per DLH
8.40
Standard cost per unit
$51.20
Explanation / Answer
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Corrrectly computed by Donn and bonus should NOT be given to every one as it can be seen there are unfavorable variance in Direct Materal. Bonuses to be given only to Labor cost and managers related to this.
Standard Qty for 30000 (30000*Column C) Standard Quantity (SQ) Standard Price (SP) Standard Unit Cost Direct Material 60000 2 8.45 16.9 Direct Labor 42000 1.4 16 22.4 Variable MOH 42000 1.4 2.5 3.5 Fixed MOH 42000 1.4 6 8.4 Acutal Unit Produced 30000 Actual Quantity Actual Quantity per unit(AQ) Actual Q/30000 Actual Rate (AP) Given Actual Cost Direct Material 64000 2.13 8.55 547200 Direct Labor 43500 1.45 15.8 687300 Variable MOH 43500 1.45 2.48 108000 Fixed MOH 43500 1.45 4.87 211800 Direct Material Price Variance (SP-AP)*AQ (8.45-8.55)*64000 -6400 Unfavorable Direct Material Quantity Variance (SQ-AQ)*SP (60000-64000)*8.45 -33800 Unfavorable Direct Material Spending Variance Price Var+Quantity Var -40200 Unfavorable Direct Labor Rate Variance (SP-AP)*AQ (16-15.8)*43500 8700 Favorable Direct Labor Efficiency Variance (SQ-AQ)*SP (42000-43500)*16 -24000 Unfavorable Direct Labor Spending Variance Price Var+Quantity Var -15300 Unfavorable Direct Var Ovh Rate Variance (SP-AP)*AQ (2.5-2.48)*43500 870 Favorable Direct Var OVH Efficiency Variance (SQ-AQ)*SP (42000-43500)*2.5 -3750 Unfavorable Direct Var OVH Spending Variance Price Var+Quantity Var -2880 Unfavorable Direct Fix Ovh Rate Variance Budgeted Overhead-Actual Overhead 210000-211800 -1800 Favorable Direct Fix OVH Volume Variance Standard Rate applied on standard hour for actual quantity-Budgeted ovh (42000*6)-210000 42000 Unfavorable Direct Fix OVH Spending Variance Price Var+Quantity Var 40200 FavorableRelated Questions
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