Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
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Chapter 23, Problem 7E
H.J. Heinz Company uses standards to control its materials costs. Assume that a batch of ketchup (7,650 pounds) has the following standards:
The actual materials in a batch may vary from the standard due to tomato characteristics. Assume that the actual quantities of materials for batch 08-99 were as follows:
a. Determine the standard unit materials cost per pound for a standard batch.
b. Determine the direct materials quantity variance for batch 08-99.
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Compute for the variances of the problem using the information given.
Answer the numbers only up to two decimal places.
A. Compute for Direct Materials Spending Variance
B. Compute for Direct Materials Price Variance
C. Compute for Direct Materials Quantity Variance
1. Complete the standard cost card for each product, showing the standard cost of direct materials and direct labor.
2. Compute the materials price and quantity variances for each material.
3. Compute the labor rate and efficiency variances for each operation.
Pickul Awning manufactures awnings and uses a standard cost system. The company allocates overhead based on the number of direct labor hours. The following are the
company's cost and standards data:
(Click the icon to view the standards.)
Requirement 1. Calculate the standard cost of one awning.
Standard cost
Direct materials
Direct labor
Variable MOH
Fixed MOH
Total standard cost
Standard cost per unit
Requirement 2a. Calculate the direct material variances. (Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variance as fa
First determine the formula for the price variance, then compute the price variance for direct materials.
Determine the formula for the quantity variance, then compute the quantity variance for direct materials.
= DM price variance
) =
First determine the formula for the efficiency variance, then compute the efficiency variance for direct labor.
x(
x(
x (
x(
= DM quantity…
Chapter 23 Solutions
Financial And Managerial Accounting
Ch. 23 - What are the basic objectives in the use of...Ch. 23 - What is meant by reporting by the principle of...Ch. 23 - Prob. 3DQCh. 23 - Prob. 4DQCh. 23 - A. What are the two variances between the actual...Ch. 23 - A new assistant controller recently was heard to...Ch. 23 - Would the use of standards be appropriate in a...Ch. 23 - Prob. 8DQCh. 23 - At the end of the period, the factory overhead...Ch. 23 - If variances are recorded in the accounts at the...
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- Please provide answer in text (Without image)arrow_forwardThe cost analyst for Sheffer Systems collected the following data concerning direct materials: Actual production 36,100 units Direct materials purchased (actual) Standard cost of materials purchased Standard direct materials costs per unit produced Standard price times actual amount of materials used Required: Compute the direct materials cost variances. Note: Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option. Direct Materials Price variance Efficiency variance Total direct materials cost variance $ 716,500 720,300 17 628,200 Farrow_forward1. For direct materials: a. Compute the price and quantity variances. b. The materials were purchased from a new supplier who is anxious to enter into a long- term purchase contract. Would you recommend that the company sign the contract? Explain. 2. For labor employed in the production of Fruta: a. Compute the rate and efficiency variances. b. In the past, the 10 persons employed in the production of Fruta consisted of 4 senior workers and 6 assistants. During June, the company experimented with 5 senior workers and 5 assistants. Would you recommend that the new labor mix be continued? Explain. 3. Compute the variable overhead rate and efficiency variances. What relation can you see between this efficiency variance and the labor efficiency variance?arrow_forward
- Compute for the variances of the problem using the information given. Answer the numbers only up to two decimal places. A. Compute for Labor Efficiency Variance B. Compute for Labor Spending Variance C. Compute for Labor Rate Variancearrow_forwardSmith Industries uses a cost system that carries direct materials inventory at a standard cost. The controller has established these standards for the cost of one basket (unit): NOTE: All dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345). For the variance conditions, your answer is either "F” (for Favorable) or "U” (for Unfavorable) - capital letter and no quotes. Smith Industries made 3,000 baskets in July and used 15,500 pounds of material to make these units. Smith Industries paid $39,370 for the 15,500 pounds of material. Complete the following table of variances and their conditions: Variance Variance Amount Favorable (F) or Unfavorable (U) Material Price Material Quantity Total DM Cost Variancearrow_forward1a. Compute the following variances for May, materials price and quantity variances.1b. Compute the following variances for May, labor rate and efficiency variances.1c. Compute the following variances for May, variable overhead rate and efficiency variancesarrow_forward
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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY