Bus 213 Managerial Accounting Chapter 21 Excel HW (1 of 2) Due Date: 11/17/17 me
ID: 2573563 • Letter: B
Question
Bus 213 Managerial Accounting Chapter 21 Excel HW (1 of 2) Due Date: 11/17/17 me Scan House, Inc. manufactures several of products in their Minnesota plant. The standard and actual costs relating to one of these products are shown below Standard Cost per Unit Actual Cost per Unit Direct materials Standard: 1.80 feet at S3.00 per foot Actual: .80 feet at $3.30 per foot S5.40 S 5.94 Direct labor: Standard: 0.90 hours at $18.00 per hour Actual: 0.92 hours at $17.50 per hour 16.20 16.10 Variable overhead: Standard: 0.90 hours at $5.00 per hour Actual: 0.92 hours at $4.50 per hour 4.50 Total cost per unit $26.10 $26.18 Excess of actual cost over standard cost per unit S0.08 As the newly appointed controller of the Minnesota plant, you wanted to verify the variance of $0.08. The variance of $0.08 sounded too good to be true. You recall a discussion of the causes of variances from one of your college classes that raised some potential concerns about the $0.08 The assistant controller has already informed you that the actual production for the month was 12,000 units. You also learned that 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 b) Labor rate and efficiency variances c) Variable overhead rate and efficiency variances 2. How much of the $0.08 excess unit cost is traceable to apparent inefficient use of labor time? 3. Provide some explanations for the largest two variances you determined in part 1Explanation / Answer
1. a Material price variance AP (a) SP (b) Variance (c=b-a) AQ (d) Total variance (e=c*d) F/U Material price variance = (AP-SP)*AQ AP = Actual price per quantity = $3.30 SP = Standard price per quantity = $3.00 AQ = Actual quantity consumed = 12,000 * 1.80 = 21,600 F= Favourable U = Unfavourable Material price variance AP (a) SP (b) Variance (c=b-a) AQ (d) Total variance (e=c*d) F/U $ 3.30 $ 3.00 -0.3 21,600 -6,480 U Material quantity variance AQ (a) SQ (b) Variance (c=b-a) SP (d) Total variance (e=c*d) F/U Material quantity variance = (AQ-SQ)*SP AQ = Actual quantity consumed = 12,000 * 1.80 = 21,600 SQ = Standard quantity = 12,000 * 1.80 = 21,600 SP = Standard price per quantity = $3.00 F= Favourable U = Unfavourable Material quantity variance AQ (a) SQ (b) Variance (c=b-a) SP (d) Total variance (e=c*d) F/U 21,600 21,600 0 $ 3.00 0 None 1. b Labor Rate variance AR (a) SR (b) Variance (c=b-a) AH (d) Total variance (e=c*d) F/U Labor Rate variance = (AR-SR)*AH AR = Actual Rate per hour = $17.50 SR = Standard Rate per hour = $18.00 AH = Actual hours = 12,000 * 0.92 = 11,040 F= Favourable U = Unfavourable Labor Rate variance AR (a) SR (b) Variance (c=b-a) AH (d) Total variance (e=c*d) F/U $ 17.50 $ 18.00 0.50 11040 5520 F Labor Efficiency variance AH (a) SH (b) Variance (c=b-a) AR (d) Total variance (e=c*d) F/U Labor Efficiency variance = (AH-SH)*AR AH = Actual hours = 12,000 * 0.92 = 11,040 SH = Standard Hours = 12,000 * 0.90 = 10,800 SR = Standard Rate per hour = $18.00 F= Favourable U = Unfavourable Labor Efficiency variance AH (a) SH (b) Variance (c=b-a) SR (d) Total variance (e=c*d) F/U 11,040 10,800 -240 $ 18.00 -4,320 U 1. c VOH spending (rate) variance AR (a) SR (b) Variance (c=b-a) AH (d) Total variance (e=c*d) F/U VOH spending variance = (AR-SR)*AH AR = Actual Rate per hour = $4.50 SR = Standard Rate per hour = $5.00 AH = Actual hours = 12,000 * 0.92 = 11,040 F= Favourable U = Unfavourable VOH spending (rate) variance AR (a) SR (b) Variance (c=b-a) AH (d) Total variance (e=c*d) F/U $ 4.500 $ 5.00 0.5 11040 5520 F VOH efficiency variance AH (a) SH (b) Variance (c=b-a) SR (d) Total variance (e=c*d) F/U VOH efficiency variance = (AH-SH)*SR AH = Actual hours = 12,000 * 0.92 = 11,040 SH = Standard Hours = 12,000 * 0.90 = 10,800 SR = Standard Rate per hour = $5.00 F= Favourable U = Unfavourable VOH efficiency variance AH (a) SH (b) Variance (c=b-a) Price (d) Total variance (e=c*d) F/U 11,040 10,800 -240 $ 5.00 -1,200 U 2 Material Rate Variance (6,480 / 12,000) = 0.54 U Material Efficiency Variance (0 / 12,000) = 0 Diff = Material Rate Variance - Material Efficiency Variance = 0.54 - 0 = 0.54 U Labor Rate variance per Unit (5,520 / 12,000) = 0.46 F Labor Efficiency variance per Unit (-4,320 / 12,000) = 0.36 U Diff = Labor Rate Variance - Labor Efficiency Variance = 0.46 - 0.36 = 0.10 F VOH Rate variance per Unit (5,520 / 12,000) = 0.46 F VOH Efficiency variance per Unit (-1,200 / 12,000) = 0.10 U Diff = Labor Rate Variance - Labor Efficiency Variance = 0.46 - 0.10 = 0.36 F Total Variance Diff = (0.54 U + 0.10 F + 0.36 F) = 0.08 U Important from here, Excess of actual over standard cost per Unit = $0.08 U Less: Labor Efficiency variance per Unit (-4,320 / 12,000) = 0.36 U VOH Efficiency variance per Unit (-1,200 / 12,000) = 0.10 U Other portion due to other variances = 0.38 F So, unit cost traceable to apparent inefficient labor time = (0.36 U + 0.10 U = 0.46 U 3 Material price variance AP (a) SP (b) Variance (c=b-a) AQ (d) Total variance (e=c*d) F/U $ 3.30 $ 3.00 -0.3 21,600 -6,480 U Material price variance is the total product of actual quantity of direct material used and the difference between standard price and actual price per unit of direct material used. It is calculated to determine the efficiency of purchasing department to obtain direct material at a comparitively low cost. A negative value of material price variance is unfavorable to the company because the actual cost will be more than estimated price per unit. Labor Rate variance AR (a) SR (b) Variance (c=b-a) AH (d) Total variance (e=c*d) F/U $ 17.50 $ 18.00 0.50 11040 5520 F The labor rate variance measures the difference between the actual cost and expected cost of labor. It is the difference between the actual labor rate paid and the standard rate, multiplied by the number of actual work hours. A positive value of labor rate variance is favorable to the company because the actual cost of labor will be less expensive than estimated.
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