Koontz Company manufactures a number of products. The standards relating to one
ID: 2559922 • Letter: K
Question
Koontz Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for May Standard Cost Actual per Cos ni t per ni Direct materials $ 3.60 Standard: 1.80 feet at $2.00 per foot Actual: 1.75 feet at $2.20 per foot $ 3.85 Direct labor: 14.40 Standard: 0.90 hours at $16.00 per hour Actual: 0.95 hours at $15.40 per hour 14.63 Variable overhead: 3.60 Standard: 0.90 hours at $4.00 per hour Actual: 0.95 hours at $3.60 per hour Total cost per unit Excess of actual cost over standard cost per unit 3.42 $21.60 21.90 $0.30 The production superintendent was pleased when he saw this report and commented: "This $0.30 excess cost is well within the 2 percent limit management has set for acceptable variances. It's obvious that there's not much to worry about with this product." Actual production for the month was 10,000 units. Variable overhead cost is assigned to products on the basis of direct labor hours. There were no beginning or ending inventories of materials Required 1. Compute the following variances for May: a. Materials price and quantity variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)Explanation / Answer
1.. a) material price variance = (standard price - actual price)*actual quantity
= (2 - 2.2)1.75
= 0.35 unfav,
material quantity variance = (standard quantity - actual quantity) standard price
= (1.80 - 1.75)2
= 0.10 fav.
b) labour rate variance = (standard rate - actual rate) actual hrs
= (16 - 15.40)0.95
= 0.57 fav.
labour efficiency variance = ( standard hrs - actual hrs ) standard rate
= (.90-.95)16
= 0.8 unfav.
c) variable overhead rate variance = (standard rate - actaul rate) actual hrs
= (4-3.6)0.95
=0.38 fav
variable overhead efficiency variance = (standard hrs - actual hrs) standard rate
= (.90- .95) 4
= 0.20 unfav
2..
3.
material price variance .35 u quantity variance .10 f .25 u labour rate .57 f efficiency .80 u .23 u variable overhead rate .38 f efficiency .20 u .18 f excess of actual over standard cost per unit 0.30 uRelated Questions
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