Saskatewan Can Company maunfactures recyclable soft drink cans. A unit of produc

Question

Saskatewan Can Company maunfactures recyclable soft drink cans. A unit of production is a case of 12 dozen cans. The following standards hace been set by the production engineering staff and the contoller.

Direct Labor:

Quanity , .25 hour

  Rate , $16 per hour

Direct material:

Quantity , 4 kilograms

Price, $.80 per kilogram

Actual material purchases amounted to 240,000 kilograms at $.81 per kilogram. Actual costs incurred in the production of 50,000 units were as follows:

Direct labor : $ 211,900 fro 13,000 hours

Direct material : $ 170,100 for 210,000 kilograms

1. Use the variance formulas to compute the direct material price and quantity variances, the direct material purchase price variance , and the the direct labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.

2. Construct an Excel speadsheet to solve the preceding requirement. Show how the solution will change if the following information changes: the standard direct labor rate is $15 per hour, and the standard direct material price is $.79 per kilogram.

Explanation / Answer

1 Standard Data: Quantity Rate Total Direct Material 4.00 0.80 3.20 Direct Labor 0.25 16.00 4.00 Standard Data for Actual Quanity: Quantity Rate Total -10,100 Direct Material 2,00,000 0.80 1,60,000 -11,900 Direct Labor 12,500 16.00 2,00,000 Actual Data Quantity Rate Total Direct Material 2,10,000 0.81 1,70,100 Direct Labor 13,000 16.30 2,11,900 Direct Material Variances Direct Labor Variances Price: (SP-AP)*AQ Used Price: (SP-AP)*AH Used (0.80-0.81)*210000 (16.00-16.30)*13000 -2100 Unfavourable -3900 Unfavourable Efficiency (SQ-AQ)*SP Efficiency (SH-AH)*SP (200000-210000)*0.80 (12500-13000)*16 -8000 Unfavourable -8000 Unfavourable Total -10100 Unfavourable Total -11900 Unfavourable 2 Standard Data: Quantity Rate Total Direct Material 4.00 0.79 3.16 Direct Labor 0.25 15.00 3.75 Standard Data for Actual Quanity: Quantity Rate Total -12,100 Direct Material 2,00,000 0.79 1,58,000 -24,400 Direct Labor 12,500 15.00 1,87,500 Actual Data Quantity Rate Total Direct Material 2,10,000 0.81 1,70,100 Direct Labor 13,000 16.30 2,11,900 Direct Material Variances Direct Labor Variances Price: (SP-AP)*AQ Used Price: (SP-AP)*AH Used (0.79-0.81)*210000 (15.00-16.30)*13000 -4200 Unfavourable -16900 Unfavourable Efficiency (SQ-AQ)*SP Efficiency (SH-AH)*SP (200000-210000)*0.79 (12500-13000)*15 -7900 Unfavourable -7500 Unfavourable Total -12100 Unfavourable Total -24400 Unfavourable 1 Standard Data: Quantity Rate Total Direct Material 4.00 0.80 3.20 Direct Labor 0.25 16.00 4.00 Standard Data for Actual Quanity: Quantity Rate Total -10,100 Direct Material 2,00,000 0.80 1,60,000 -11,900 Direct Labor 12,500 16.00 2,00,000 Actual Data Quantity Rate Total Direct Material 2,10,000 0.81 1,70,100 Direct Labor 13,000 16.30 2,11,900 Direct Material Variances Direct Labor Variances Price: (SP-AP)*AQ Used Price: (SP-AP)*AH Used (0.80-0.81)*210000 (16.00-16.30)*13000 -2100 Unfavourable -3900 Unfavourable Efficiency (SQ-AQ)*SP Efficiency (SH-AH)*SP (200000-210000)*0.80 (12500-13000)*16 -8000 Unfavourable -8000 Unfavourable Total -10100 Unfavourable Total -11900 Unfavourable 2 Standard Data: Quantity Rate Total Direct Material 4.00 0.79 3.16 Direct Labor 0.25 15.00 3.75 Standard Data for Actual Quanity: Quantity Rate Total -12,100 Direct Material 2,00,000 0.79 1,58,000 -24,400 Direct Labor 12,500 15.00 1,87,500 Actual Data Quantity Rate Total Direct Material 2,10,000 0.81 1,70,100 Direct Labor 13,000 16.30 2,11,900 Direct Material Variances Direct Labor Variances Price: (SP-AP)*AQ Used Price: (SP-AP)*AH Used (0.79-0.81)*210000 (15.00-16.30)*13000 -4200 Unfavourable -16900 Unfavourable Efficiency (SQ-AQ)*SP Efficiency (SH-AH)*SP (200000-210000)*0.79 (12500-13000)*15 -7900 Unfavourable -7500 Unfavourable Total -12100 Unfavourable Total -24400 Unfavourable

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