"Wonderful! Not only did our salespeople do a good job in meeting the sales budget this year, but our production people did a good job in controlling costs as well," said Kim Clark, president of Martell Company. "Our $34,400 overall manufacturing cost variance is only 1.0% of the $3,440,000 standard 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 with a standard cost card as follows: Inputs Direct materials Direct labor Variable overhead Fixed overhead Total standard cost per unit (1) Standard Quantity or Hours 4.50 feet (2) Standard Price Standard Cost or Rate $ 3.80 per foot $ 11 per hour (1) x (2) $ 17.10 1.7 hours 18.70 1.7 hours 1.7 hours $ 2.50 per hour $ 5.50 per hour 4.25 9.35 $ 49.40 The following additional information is available for the year just completed: a. The company manufactured 15,000 units during the year. b. A total of 65,000 feet of material was purchased during the year at a cost of $4.00 per foot. All of this material was used to manufacture the 15,000 units produced. There were no beginning or ending inventories. c. The company worked 28,000 direct labor-hours at a direct labor cost of $10.70 per hour. d. Overhead is applied to products based on standard direct labor-hours. Data relating to manufacturing overhead costs follow: Denominator activity level (direct labor-hours) Budgeted fixed overhead costs Actual variable overhead costs incurred Actual fixed overhead costs incurred Required: 1. Compute the materials price and quantity variances. 2. Compute the labor rate and efficiency variances. 3. For manufacturing overhead compute: a. The variable overhead rate and efficiency variances. b. The fixed overhead budget and volume variances. 23,000 $ 126,500 $ 72,800 $ 124,000 Note: For all requirements, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. 1. Materials price variance 1. Materials quantity variance 2. Labor rate variance 2. Labor efficiency variance 3a. Variable overhead rate variance 3a. Variable overhead efficiency variance 3b. Fixed overhead budget variance 3b. Fixed overhead volume variance

"Wonderful! Not only did our salespeople do a good job in meeting the sales budget this year, but our production people did a good job in controlling costs as well," said Kim Clark, president of Martell Company. "Our $34,400 overall manufacturing cost variance is only 1.0% of the $3,440,000 standard 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 with a standard cost card as follows: Inputs Direct materials Direct labor Variable overhead Fixed overhead Total standard cost per unit (1) Standard Quantity or Hours 4.50 feet (2) Standard Price Standard Cost or Rate $ 3.80 per foot $ 11 per hour (1) x (2) $ 17.10 1.7 hours 18.70 1.7 hours 1.7 hours $ 2.50 per hour $ 5.50 per hour 4.25 9.35 $ 49.40 The following additional information is available for the year just completed: a. The company manufactured 15,000 units during the year. b. A total of 65,000 feet of material was purchased during the year at a cost of $4.00 per foot. All of this material was used to manufacture the 15,000 units produced. There were no beginning or ending inventories. c. The company worked 28,000 direct labor-hours at a direct labor cost of $10.70 per hour. d. Overhead is applied to products based on standard direct labor-hours. Data relating to manufacturing overhead costs follow: Denominator activity level (direct labor-hours) Budgeted fixed overhead costs Actual variable overhead costs incurred Actual fixed overhead costs incurred Required: 1. Compute the materials price and quantity variances. 2. Compute the labor rate and efficiency variances. 3. For manufacturing overhead compute: a. The variable overhead rate and efficiency variances. b. The fixed overhead budget and volume variances. 23,000 $ 126,500 $ 72,800 $ 124,000 Note: For all requirements, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. 1. Materials price variance 1. Materials quantity variance 2. Labor rate variance 2. Labor efficiency variance 3a. Variable overhead rate variance 3a. Variable overhead efficiency variance 3b. Fixed overhead budget variance 3b. Fixed overhead volume variance

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter9: Evaluating Variances From Standard Costs

Section: Chapter Questions

Problem 25E: Lowell Manufacturing Inc. has a normal selling price of 20 per unit and has been selling 125,000...

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