Cost Management
Cost Management
8th Edition
ISBN: 9781259917028
Author: BLOCHER, Edward
Publisher: Mcgraw-hill Education,
Question
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Chapter 16, Problem 46P

1.

To determine

Determine the direct labor rate and efficiency variance for assembly departments.

1.

Expert Solution
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Explanation of Solution

Compute the labor rate variance for the prior year is as follows:

Labor rate variance} = (Actual labor rateStandard labor rate)$15,000,000$14,000,000$100,000

Compute the efficiency variance for the prior year:

Efficiency variance} = (Standard labor rateStandard labor efficiency)$14,000,000$13,440,000$560,000

Compute the labor rate variance for the current year:

Labor rate variance} = (Actual labor rateStandard labor rate)$14,440,000$14,000,000$400,000

Compute the efficiency variance for the current year:

Efficiency variance} = (Standard labor rateStandard labor efficiency)$14,700,000$14,000,000$700,000

Working notes:

Determine the actual and standard labor rate for both the periods:

ParticularsPrior year(W.N)Current year(W.N)
Total actual direct labor hours$500,000$25 × 20,000$400,000$20 × 20,000
Total standard direct labor hours$480,000$24 × 20,000$420,000$21 × 20,000
     
Direct labor rate$15,000,000$30 × 500,000$14,400,000$36 × 400,000
 $14,000,000$28 × 500,000$14,000,000$35 × 400,000
Standard rate$13,440,000$28 × 480,000$14,700,000$35 × 420,000

Determine the direct labor rate and efficiency variance for testing departments

Compute the labor rate variance for the prior year:

Labor rate variance} = (Standard labor rateActual labor rate)$5,040,000$4,800,000$240,000 (F)

Compute the efficiency variance for the prior year:

Efficiency variance} = (Standard labor efficiencyStandard labor rate)$5,880,000$5,040,000$840,000 (F)

Compute the labor rate variance for the current year:

Labor rate variance} = (Standard labor rateActual labor rate)$5,000,000$4,800,000$200,000 (F)

Compute the efficiency variance for the current year:

Efficiency variance} = (Standard labor efficiencyStandard labor rate)$5,500,000$5,000,000$500,000 (F)

Working notes:

Determine the actual and standard labor rate of testing department for both the periods:

ParticularsPrior year(W.N)Current year(W.N)
Total actual direct labor hours$240,000$12 × 20,000$200,000$10 × 20,000
Total standard direct labor hours$280,000$14 × 20,000$220,000$11 × 20,000
     
Direct labor rate$4,800,000$20 × 240,000$4,800,000$24 × 200,000
 $5,040,000$21 × 240,000$5,000,000$25 × 200,000
Standard rate$5,880,000$21× 280,000$5,500,000$25 × 220,000

2.

To determine

Determine the partial operational productivity for prior year and current year for assembly department.

2.

Expert Solution
Check Mark

Explanation of Solution

Compute the partial operational productivity for prior year:

Direct Labor operational productivity} =( Tested unit of instrumentsTotal actual direct labor hours)20,000$500,000$0.04

Compute the partial operational productivity for current year:

Direct Labor operational productivity} =( Tested unit of instrumentsTotal actual direct labor hours (Current year))20,000$400,000$0.05

Compute the partial operational productivity of for testing department for prior year:

Direct Labor operational productivity} =( Tested unit of instrumentsTotal actual direct labor hours)20,000$240,000$0.0833

Compute the partial operational productivity of testing department for current year:

Direct Labor operational productivity} =( Tested unit of instrumentsTotal actual direct labor hours (Current year))20,000$200,000$0.1

3.

To determine

Determine the partial financial productivity for prior year and current year for assembly department.

3.

Expert Solution
Check Mark

Explanation of Solution

Compute the partial financial productivity for prior year:

Partial financial productivity} =( Tested unit of instrumentsTotal direct labor rate )20,000$15,000,000$0.0013

Compute the partial financial productivity for current year:

Partial financial productivity current year} =( Tested unit of instrumentsTotal standard labor rate )20,000$14,000,000$0.0014

Compute the partial financial productivity of testing department for prior year:

Direct Labor operational productivity (prior year)} =( Tested unit of instrumentsTotal actual direct labor hours)20,000$4,800,000$0.0042

Compute the partial operational productivity of testing department for current year:

Direct Labor operational productivity (current year)} =( Tested unit of instrumentsTotal actual direct labor hours)20,000$4,800,000$0.0042

4.

To determine

Compare and comment results based on two requirements:

4.

Expert Solution
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Explanation of Solution

Operational partial productivity
ParticularsPrior  YearCurrent year    Changes
Assembly0.040.05            0.01 F
Testing0.08330.10.0167  F
    
Financial partial productivity
ParticularsPrior  YearCurrent year    Changes
Assembly0.00130.00140.0001 F
Testing0.00420.00420

The operational partial productivity for both the departments is increased in the current year compared to previous year. The financial partial productivity is also increased compared to testing department.

5.

To determine

Explain how the productivity measure differ from variance analyze.

5.

Expert Solution
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Explanation of Solution

The standards in costing system is determined independently and with changes in operating factors. The standards for operation of the year will change due to changes in technology, materials, design, and production workers.

Under productivity measures, the productivity of the previous year is determined without adjusting changes occurred during the current year.

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