Concept explainers
Control Limits
During the last 6 weeks, the actual costs of materials for Brennen Company were as follows:
The
Required:
Plot the actual costs over time against the upper and lower limits. Comment on whether or not there is a need to investigate any of the variances.
Use the following information to complete Brief Exercises 10-23 and 10-24:
Krumple Inc. produces aluminum cans. Production of 12-ounce cans has a standard unit quantity of 4.7 ounces of aluminum per can. During the month of April, 450,000 cans were produced using 1,875,000 ounces of aluminum. The actual cost of aluminum was $0.10 per ounce and the standard price was $0.08 per ounce. There are no beginning or ending inventories of aluminum.
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Chapter 10 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
- Kavallia Company set a standard cost for one item at 328,000; allowable deviation is 14,500. Actual costs for the past six months are as follows: Required: 1. Calculate the variance from standard for each month. Which months should be investigated? 2. What if the company uses a two-part rule for investigating variances? The allowable deviation is the lesser of 4 percent of the standard amount or 14,500. Now which months should be investigated?arrow_forwardBarbaro Production Company has developed the following standards for one of its products: STANDARD VARIABLE COST CARD One Unit of Product Materials: 30 square feet × $5 per square foot $150.00 Direct labor: 16 hours × $7 per hour 112.00 Variable manufacturing overhead: 16 direct labor hours × $5 per hour 80.00 Total standard variable cost per unit $342.00 The company records materials price variances at the time of purchase. The following activity occurred during the month of April: Materials purchased: 80,000 sq. feet at $5.30 per sq. foot Materials used: 74,000 square feet Units produced: 2,500 units Direct labor: 42,000 hours at $6.70 per hour Actual variable manufacturing overhead: $228,000 Required: d. Calculate the direct labor efficiency variance. e. Calculate the variable overhead spending variance. f. Calculate the variable overhead efficiency variance.arrow_forwardThe director of cost management for Odessa Company uses a statistical control chart to help management determine when to investigate variances. The critical value is 1 standard deviation. The company incurred the following direct-labor efficiency variances during the first six months of the current year. January February March April May June $ 300 F 850 U 750 U 950 U 1,100 U 1,480 U The standard direct-labor cost during each of these months was $24,000. The controller has estimated that the firm's monthly direct- labor variances have a standard deviation of $1,000. Required: 2-a. Determine the cutoff value for investigation if the controller's rule of thumb is to investigate all variances equal to or greater than 6 percent of standard cost. 2-b. Based on the cutoff value, which month will have its direct-labor efficiency variance investigated? Complete this question by entering your answers in the tabs below. Req 2A Reg 2B Determine the cutoff value for investigation if the…arrow_forward
- Krueger Corporation in Washington, D.C., U.S., recently implemented a standard cost system. The company's cost accountant has gathered the following information needed to perform a variance analysis at the end of the month: Standard Cost Information+ Direct materials Quantity allowed per unit Direct labor rate.. Hours allowed per unit. Fixed overhead budgeted Normal level of production. Variable overhead application rate Fixed overhead application rate ($12,000 _ 1,200 units)... 10.00 per unit- Total overhead application rate. $5 per pound 100 pounds per unit $20.00 per hour ..2 hours per unit- $12,000 per month 1,200 units+ $2.00 per unit $12.00 per unit Actual Cost Information+ Cost of materials purchased and used. Pounds of materials purchased and used Cost of direct labor. Hours of direct labor Cost of variable overhead Cost of fixed overhead. Volume of production. $468,000- ..104,000 pounds- $46,480- ..2,240 hours- $2,352- $12,850- 1,000 units- Instructions Compute the direct…arrow_forwardinformation on Bowgie Chemicals direct materials costs follows. Actual quantities of direct materials used 30,800 Actual costs of direct materials used $ 137,800 Standard price per unit of direct materials $ 4.28 Flexible budget for direct materials $ 121,300 Bowgie Chemicals has no materials inventories. Required:a. Prepare a short report for management showing Bowgie Chemicals’s direct materials price and efficiency variances.b. (Appendix) Prepare the journal entries to record the purchase and use of the direct materials using standard costing.arrow_forwardThe following standards have been set for each test performed: Standard Hours Standard Price Direct materials. Direct labor. or Quantity 3•pounds 0.4 hours or Rate S0.75 per pound S12 per hour During March, Your Company performed 2,000 tests. • 7,200 pounds of sand were used for core tests at a cost of $6,120. The materials price variance for March is: Enter a favorable variance as a positive number; an unfavorable variance as a negative number. ENTER YOUR ANSWER WITHOUT DOLLAR SIGNS OR OTHER DESCRIPTIONSarrow_forward
- Longman, Inc., manufactures lead crystal glasses. Longman, Inc.'s managers recently calculated the following: Variances after completing production of 6,800 glasses: Direct materials cost variance $1,496 F Direct labor cost variance $6,120 F Direct materials efficiency variance $680 U Direct labor efficiency variance $8,840 U Read the requirements. Requirement 1. For each variance, who in Longman, Inc.'s organization is most likely responsible? Direct materials cost variance Direct materials efficiency variance Requirements Direct labor cost variance Direct labor efficiency variance 1. For each variance, who in Longman, Inc.'s organization is most likely responsible? 2. Interpret the direct materials and direct labor variances for Longman, Inc.'s management. Print Donearrow_forwardZillow Inc. has the following data related to direct materials costs for the current month: actual cost for 7,000 pounds of material at $2.50 per pound and standard cost for 6,700 pounds of material at $3.20 per pound. What is the direct materials quantity or efficiency variance? Group of answer choices -$4,900 favorable $4,900 unfavorable $960 unfavorable -$960 favorablearrow_forward[The following information applies to the questions displayed below.] The director of cost management for Odessa Company uses a statistical control chart to help management determine when to investigate variances. The critical value is 1 standard deviation. The company incurred the following direct-labor efficiency variances during the first six months of the current year. January February March. April May June $ 250 F 800 U 700 U 908 U 1,050 U 1,200 U The standard direct-labor cost during each of these months was $19,000. The controller has estimated that the firm's monthly direct-labor variances have a standard deviation of $950. Required: 1-a. Draw a statistical control chart and plot the variance data given above. 1-b. Which variances will be investigated?arrow_forward
- Schematize pertormance analysis and comment on variances. Following is the data of a manufacturing concern. From the figures given below, calculate: () Materials Cost Variance (W) Material Price Varlance (H) Material Usage Variance Product X During a particular period 160 tons of output was undertaken. The standard price per unit of materials is $20. The materials required for actual production were 4,000 units. An amount of $16,000 was spent on purchasing the materlals. The standard quantity of materials requlred for producing one fon of output is 120 units. Product Y The standard quantity of materlals required for producing one ton of output is 240 unils. The standard price per unit of materials is $24. During a porticular period d40 fons of production were 24.000 units. An amount of $48.000 was spent on purchasing the materials output was undertaken. The materials required for octualarrow_forwardThe direct materials price variance is: $21,450 unfavorable. $52,800 unfavorable. $22,890 favorable. $22,890 unfavorable. $21,450 favorable. A) B) 20) The Fins Company produces animated sharks and has collected the following data on one of its products - the Great White Shark. During the period the company produced 25,000 Great White Sharks. The following table shows information about the direct materials needed to produce the Great White Sharks: C) D) E) Direct materials standard (7 pounds @ $1.65/pound) Actual price of materials purchased Actual direct materials purchased and used $11.55 per finished unit $ 1.80 143,000 pounds B) The direct materials price variance is: A) $21,450 unfavorable. $52,800 unfavorable. $22,890 favorable. $22,890 unfavorable. $21,450 favorable. C) D) E) 3 20) The Fins Company produces animated sharks and has collected the following data on one of its products-the Great White Shark. During the period the company produced 25,000 Great White Sharks. The…arrow_forwardreported for the production of l100,000 toy boats: Direct material variances-solving for price and usage variances recently implemented a standard cost system and has designed the system to isolate Fiberworks Company is a manufacturer of fiberglass toy boats. The company has Fue ly implemented a standard cost system and has designed the system to isolate siances as soon as possible. During the month of May, the following results were norted for the production of 100,000 toy boats: Direct materials (fiberglass) purchased ... . . Direct materials issued into production. 200,000 pounds 180,000 pounds Standard pounds allowed per boat 1.75 pounds Standard price per pound.... Cost of fiberglass purchased .. $7.00 $1,420,000 .. Required: a. Calculate the actual cost per pound of fiberglass purchased during May. b. Calculate the direct materials purchase price variance for May. C. Calculate the direct materials usage variance for May. d. Comment on calculating the material price variance based…arrow_forward
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