Tom Belford and Tony Sorrentino own a small business devoted to kitchen and bath granite installations. Recently, building contractors have insisted on up-front bid prices for a house rather than the cost-plus system that Tom and Tony had been using. They worry because natural flaws in the granite make it impossible to tell in advance exactly how much granite will be used on a particular job. In addition, granite can be easily broken, meaning that Tom or Tony could ruin a slab and would need to start over with a new one. Sometimes the improperly cut pieces could be used for smaller installations, sometimes not. All their accounting is done by a local certified public accounting firm headed by Charlene Davenport. Charlene listened to their concerns and suggested that it might be time to implement tighter controls by setting up a
Charlene reviewed the invoices pertaining to a number of Tom and Tony's previous jobs to determine the average amount of granite and glue needed per square foot. She then updated prices on both materials to reflect current conditions. The standards she developed for one square foot of counter installed were as follows:
Granite, per square foot | $50.00 |
Glue (10 oz. @ $0.15) | 1.50 |
Direct labor hours: | |
Cutting labor (0.10 hr. @ $15) | 1.50 |
Installation labor (0.25 hr. @ $25) | 6.25 |
These standards assumed that one seamless counter requires one sink cut (the space into which the sink will fit) as well as cutting the counter to fit the space available.
Charlene tracked the actual costs incurred by Tom and Tony for granite installation for the next 6 months. She found that they completed 50 jobs with an average of 32 square feet of granite installed in each one. The following information on actual amounts used and cost was gathered:
Granite purchased and used (1,640 sq. ft.) | $82,948 |
Glue purchased and used (16,000 oz.) | $2,560 |
Actual hours cutting labor | 200 |
Actual hours installation labor | 450 |
The actual wage rate for cutting and installation labor remained unchanged from the standard rate.
Calculate the materials price variances and materials usage variances for granite and for glue for the past 6 months.
Calculate the labor rate variances and labor efficiency variances for cutting labor and for installation labor for the past 6 months
Trending nowThis is a popular solution!
Step by stepSolved in 2 steps
- Moisha is developing material standards for her company. The operations manager wants grade A widgets because they are the easiest to work with and are the quality the customers want. Grade B will not work because customers do not want the lower grade, and it takes more time to assemble the product than with grade A materials. Moisha calls several suppliers to get prices for the widget. All are within $0.05 of each other. Since they will use millions of widgets, she decides that the $0.05 difference is important. The supplier who has the lowest price is known for delivering late and low-quality materials. Moisha decides to use the supplier who is $0.02 more but delivers on time and at the right quality. This supplier charges $0.42 per widget. Each unit of product requires 5 widgets. What is the standard cost per unit for widgets? Round your answer to two decimal places. Standard cost per unit $fill in the blank 1arrow_forwardThe company president does not believe that the formula should be altered for fear it will tarnish the company’s brand. She prefers that the company become more efficient in manufacturing the product. If fixed manufacturing costs can be reduced by $250,000 and variable direct manufacturing labor costs are reduced by $1 per unit, will Westerly achieve its target cost?arrow_forwardThe operations vice president of Security Home Bank has been interested in investigating the efficiency of the bank’s operations. She has been particularly concerned about the costs of handling routine transactions at the bank and would like to compare these costs at the bank’s variousbranches. If the branches with the most efficient operations can be identified, their methods can be studied and then replicated elsewhere. While the bank maintains meticulous records of wages and other costs, there has been no attempt thus far to show how those costs are related to the various services provided by the bank. The operations vice president has asked your help in conducting an activity-based costing study of bank operations. In particular, she would like to know the cost of opening an account, the cost of processing deposits and withdrawals, and the cost of processing other customer transactions.The Westfield branch of Security Home Bank has submitted the following cost data for last year:…arrow_forward
- AN Daniel and Darnell are considering offering a doggy daycare service. After some research, Daniel and Darnell found several pet daycare facilities in their area; but they were expensive! Further, the facili- ties were sterile and didn't provide for a "homey" or fun environment for their pets. Daniel and Damell felt they could easily solve this problem. Daniel's home would be the location for their business since it already had a fenced-in yard a nd is located two blocks from a dog park. Estimated costs for building an outdoor shelter, plus other licensing and business start-up costs, are as follows. Shelter (depreciated over 7 years) $500 per year Licensing & other annual costs $750 per year $15 per hour $15 per day per dog Hourly wage for hired labor; planned for only 200 hours per year Variable costs for food Estimated volume of dogs per day (Assume business is open 5 days a week) Which pricing strategy, target costing or cost-plus, would be more appropriate for this company,…arrow_forwardJames is considering replacing his worn-out machines. Which of the following is not a relevant cost for James when considering various available options? Select one: a. Changes in costs of labour needed to operate the new machines. b. Costs of acquiring the current worn-out machines. c. Costs of delivering the new machine. d. Costs of replacing old machines. e. None of the above answers is correct.arrow_forwardKim Inc. must install a new air-conditioning unit in its main plant. Kim must install one or the other of the units; otherwise, the highly profitable plant would have to shut down. Two units are available, HCC and LCC (for high and low capital costs, respectively). HCC has a high capital cost but relatively low operating costs, while LCC has a low capital cost but higher operating costs because it uses more electricity. The costs of the units are shown here. Kim's WACC is 5%. HCC LCC 0 1 2 3 5 -$590,000 -$110,000 -$45,000 -$170,000 -$45,000 -$45,000 -$170,000 -$170,000 -$45,000 -$170,000 -$45,000 -$170,000 a. Which unit would you recommend? 1. Since all of the cash flows are negative, the NPV's cannot be calculated and an alternative method must be employed. II. Since all of the cash flows are negative, the NPV's will be negative and we do not accept any project that has a negative NPV. III. Since we are examining costs, the unit chosen would be the one that had the lower NPV of costs.…arrow_forward
- Harrington Manufacturing Inc. began operation 5 years ago producing the probo, a new type of instrument it hoped to sell to doctors, dentist, and hospitals. The demand for probos far exceeded initial expectations, and the company was unable to produce enough probos to meet that demand. Harrington was manufacturing probos on equipment built at the start of its operations, but it needed more efficient equipment to meet demand. The company management decided to design and build the equipment, because no equipment currently available on the market was suitable for producing probos. In 2021, a section of the plant was devoted to development of the new equipment and a special staff of personnel was hired. Within six months, a machine was developed at a cost of $170,000that increased production and reduced labor cost substantially. Sparked by the success the new machine, the company built three more machines of the same type at a cost of $80,000 each. Required: In addition to satisfying a…arrow_forwardWhite Sand Quarries is planning to replace a few of their existing MD48 haul trucks and has asked for your help in deciding between the MD64 and the MD48 trucks. Joey at the truck dealership is convinced that hauling with the larger MD64 produces a cheaper unit cost ($/ton). There are several differences in the trucks and you are not quite sure he is correct. You've spoken with Mike, who looks after the existing fleet of MD48S and has great records on equipment cost and performance. From him you learn that the MD48 has a 48 ton capacity and can complete a full cycle in 10 minutes. He also tells you that he operates a truck in his fleet for $150.91 per hour, which he proudly explains is better than any other fleet in the company and includes the company standard 10 percent interest paid annually on the book value. Joey is trying hard to make a sale and is happy to help you gather info on the MD64S. After a long phone chat, you have the following information. MD64 Purchase Price $…arrow_forwardPlease refer to the attached scenario Identify any unavoidable costs associated with the operation of Fishing Unlimited.arrow_forward
- Please help me with show all calculation thankuarrow_forwardAlis keen to expand the business operations of Shortcuts to Food by including a home delivery service for individual customers. To make this possible Al has identified an old refrigerated van that will be suitable after some repairs are completed. Al has provided the following breakdown of cost for the van. Refrigerated Van Required Stamp Duty and On road costs Installation of a GPS/Map unit Al has deemed this installation as optional because he could use his phone but it would be helpful to have the system build in. Repairs required to the refrigeration unit o These repairs are essential to enable it to keep food at the correct temperature for delivery. $ 14,000 S 1,300 S 2,500 S 6,300 New tyres o The van will not be able to be driven legally until the tyres are replaced. As Al intends to keep the van for 4 years at least one new set of tyres will need to be purchased during that period. 880 REQUIRED: 1. Prepare the General Journal entries required to account for the acquisition of…arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education