Accounting: What the Numbers Mean
11th Edition
ISBN: 9781259535314
Author: David Marshall, Wayne William McManus, Daniel Viele
Publisher: McGraw-Hill Education
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Chapter 15, Problem 15.20P
Problem 15.20
LO 4. 5
Calculate variable cost variances-explain results The standards for one case of liquid weed killer are as follows:
| Direct materials | 5 lb @ $ 6.80/lb |
| Direct labor | 2.4 hr @ $14.00/hr |
| Variable |
1.5 hr @ $ 4.50/hr |
During the week ended May 6, the following activity took place:
2,910 machine hours were worked.
11,400 lb of raw material were purchased for inventory at a total cost of $80,940.
1,900 cases of finished product were produced.
9,260 lb of raw material were used.
4,420 labor hours were worked at an average rate of $14.35 Per hour.
$12,513 actual variable overhead costs were incurred.
Required:
Calculate each of the following variances and provide plausible explanations for the results:
- Price variance for raw materials purchased.
- Raw materials usage variance.
- Direct labor rate variance.
- Direct labor efficiency variance.
- Variable overhead spending variance.
- Variable overhead efficiency variance.
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Exercise 3 (Labor and Variable Overhead Variances)
Halliwell Audio, Inc., manufactures military-specification compact discs.
The company uses standards to control its costs. The labor standards that
have been set for one disc are as follows:
Standard Hours
Standard Cost
P2.40
Standard Rate per Hour
24 minutes
P6.00
During July, 8,500 hours of direct labor time were recorded to make 20,000
discs. The direct labor cost totaled P49,300 for the month.
Required:
1. What direct labor cost should have been incurred to make the 20,000
discs? By how much does this differ from the cost that was incurred?
2. Break down the difference in cost from (1) above into a labor rate
variance and a labor efficiency variance.
3. The budgeted variable manufacturing overhead rate is P4 per direct
labor-hour. During July, the company incurred P39,100 in variable
manufacturing overhead cost. Compute the variable overhead spending
and efficiency variances for the month.
QUESTION 3
The following standards for variable manufacturing overhead have been established for a company that makes only one product:
Standard hours per unit of output
1.6 hours
$11.55 per hour
Standard variable overhead rate
The following data pertain to operations for the last month:
Actual hours
4,900 hours
Actual total variable manufacturing overhead cost
Actual output
3,000 units
What is the variable overhead efficiency variance for the month?
O $1,190 F
O $1,680 F
O $1,155 U
O $1,190 U
$58.310
Variance Problem
Standard Quantity
Standard Cost
Standard price
$1.75 per hr
$11.50 per hr
$5.00 per hr
per unit
$7.00
$13.80
$6.00
per unit
Direct Materials
Direct Labor
Variable Overhead
4
1.2
1.2
Manufacturing overhead is applied using direct labor hours as the base. During the month of July, XYZ
company had the following information available about production:
a. 9,000 units were produced
b. 37,000 lbs of raw materials were purchased at a cost of $62,900
c. There was no beginning inventory and no ending iInventory of raw materials
d. 10,500 hours of direct labor were used during the month at a cost of $119,175
e. Variable overhead cost in July totaled $57,750
Compute the following and verify the total variance for each component of product cost:
1. Material price variance, Material quantity variance, and Total material variance
2. Labor rate variance, Labor efficiency variance, and Total labor variance
3. Variable Overhead spending variance, Variable Overhead efficiency variance,…
Chapter 15 Solutions
Accounting: What the Numbers Mean
Ch. 15 - Prob. 15.1MECh. 15 - Prob. 15.2MECh. 15 - Prob. 15.3MECh. 15 - Prob. 15.4MECh. 15 - Mini-Exercise 15.5 LO 4, 5, 6 Variable overhead...Ch. 15 - Mini-Exercise 15.6
LO 4. 5, 6
Fixed overhead...Ch. 15 - Prob. 15.7ECh. 15 - Prob. 15.8ECh. 15 - Prob. 15.9ECh. 15 - Prob. 15.10E
Ch. 15 - Prob. 15.11ECh. 15 - Prob. 15.12ECh. 15 - Exercise 15.13 LO 4. 5 Direct material...Ch. 15 - Exercise 15.14 LO 4, 5 Direct material...Ch. 15 - Prob. 15.15ECh. 15 - Prob. 15.16ECh. 15 - Exercise 15.17 LO 9 Investment center analysis;...Ch. 15 - Prob. 15.18ECh. 15 - Problem 15.19 LO 4. 5 Calculate variable cost...Ch. 15 - Problem 15.20 LO 4. 5 Calculate variable cost...Ch. 15 - Problem 15.21 LO 4, 5 Direct labor...Ch. 15 - Problem 15.22 LO 4, 5 Direct labor...Ch. 15 - Problem 15.23 LO 5, 6 Fixed overhead...Ch. 15 - Case 15.25 LO 3 Performance reporting The chair of...Ch. 15 - Case 15.26 LO 3 Flexible budgeting One of the...Ch. 15 - Case 15.27 LO 4 Frequency of performance reporting...Ch. 15 - Case 15.28 LO 5 Rank the importance of eight...Ch. 15 - Case 15.29 LO 4. 5 Direct material variances-the...Ch. 15 - Case 15.30 LO 5 Evaluate the effects of erroneous...Ch. 15 - Prob. 15.31CCh. 15 - Case 15.32 The planning and control environment:...
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