Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 8, Problem 8.45P
Nonfinancial variances. Kathy’s Kettle Potato Chips produces gourmet chips distributed to chain sub shops throughout California. To ensure that their chips are of the highest quality and have taste appeal, Kathy has a rigorous inspection process. For quality control purposes, Kathy has a standard based on the number of pounds of chips inspected per hour and the number of pounds that pass or fail the inspection.
Kathy expects that for every 1,000 pounds of chips produced, 200 pounds of chips will be inspected. Inspection of 200 pounds of chips should take 1 hour. Kathy also expects that 1% of the chips inspected will fail the inspection. During the month of May, Kathy produced 113,000 pounds of chips and inspected 22,300 pounds of chips in 120 hours. Of the 22,300 pounds of chips inspected, 215 pounds of chips failed to pass the inspection.
- A. Compute two variances that help determine whether the time spent on inspections was more or less than expected. (Follow a format similar to the one used for the variable
overhead spending and efficiency variances, but without prices.)
Required
- B. Compute two variances that can be used to evaluate the percentage of the chips that fails the inspection.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Kathy’s Kettle Potato Chips produces gourmet chips distributed to chain sub shops throughout California. To ensure that their chips are of the highest quality and have taste appeal, Kathy has a rigorous inspection process. For quality control purposes, Kathy has a standard based on the number of pounds of chips inspected per hour and the number of pounds that pass or fail the inspection. Kathy expects that for every 1,000 pounds of chips produced, 200 pounds of chips will be inspected. Inspection of 200 pounds of chips should take 1 hour. Kathy also expects that 1% of the chips inspected will fail the inspection. During the month of May, Kathy produced 113,000 pounds of chips and inspected 22,300 pounds of chips in 120 hours. Of the 22,300 pounds of chips inspected, 215 pounds of chips failed to pass the inspection.
Q. Compute two variances that can be used to evaluate the percentage of the chips that fails the inspection
Zuzu is a large manufacturer of snack cakes. The company operates distribution centers in Chicago. The distribution center bakes and packages the snack cakes and ships them to grocery warehouses throughout the country. Because of the high standards set for both quality and appearance, there is a reasonable number of “seconds” that do not meet standards and are sold to company outlets for sale at reduced prices. In recent years, the company’s average yield has been 90% of first-quality products for sale to grocery warehouses. The remaining 10% is sent to the outlet store. Zuzu’s performance-evaluation system pays its distribution center managers substantial bonuses if the company achieves annual budgeted profit numbers. In the last quarter of 2017, Noah Spalding, Zuzu’s controller, noted a significant increase in yield percentage of the Chicago distribution center, from 90% to 98%. This increase resulted in a 10% increase in the center’s profits. During a recent trip to the Chicago…
Zuzu is a large manufacturer of snack cakes. The company operates distribution centers in Chicago. The distribution center bakes and packages the snack cakes and ships them to grocery warehouses throughout the country. Because of the high standards set for both quality and appearance, there is a reasonable number of “seconds” that do not meet standards and are sold to company outlets for sale at reduced prices. In recent years, the company’s average yield has been 90% of first-quality products for sale to grocery warehouses. The remaining 10% is sent to the outlet store. Zuzu’s performance-evaluation system pays its distribution center managers substantial bonuses if the company achieves annual budgeted profit numbers. In the last quarter of 2017, Noah Spalding, Zuzu’s controller, noted a significant increase in yield percentage of the Chicago distribution center, from 90% to 98%. This increase resulted in a 10% increase in the center’s profits. During a recent trip to the Chicago…
Chapter 8 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 8 - How do managers plan for variable overhead costs?Ch. 8 - How does the planning of fixed overhead costs...Ch. 8 - How does standard costing differ from actual...Ch. 8 - What are the steps in developing a budgeted...Ch. 8 - What are the factors that affect the spending...Ch. 8 - Assume variable manufacturing overhead is...Ch. 8 - Describe the difference between a direct materials...Ch. 8 - What are the steps in developing a budgeted fixed...Ch. 8 - Why is the flexible-budget variance the same...Ch. 8 - Explain how the analysis of fixed manufacturing...
Ch. 8 - Provide one caveat that will affect whether a...Ch. 8 - The production-volume variance should always be...Ch. 8 - What are the variances in a 4-variance analysis?Ch. 8 - Overhead variances should be viewed as...Ch. 8 - Describe how flexible-budget variance analysis can...Ch. 8 - Each of the following statements is correct...Ch. 8 - Steed Co. budgets production of 150,000 units in...Ch. 8 - As part of her annual review of her companys...Ch. 8 - Culpepper Corporation had the following...Ch. 8 - Fordham Corporation produces a single product. The...Ch. 8 - Variable manufacturing overhead, variance...Ch. 8 - Fixed manufacturing overhead, variance analysis...Ch. 8 - Variable manufacturing overhead variance analysis....Ch. 8 - Fixed manufacturing overhead variance analysis...Ch. 8 - Manufacturing overhead, variance analysis. The...Ch. 8 - 4-variance analysis, fill in the blanks. ProChem...Ch. 8 - Straightforward 4-variance overhead analysis. The...Ch. 8 - Straightforward coverage of manufacturing...Ch. 8 - Overhead variances, service sector. Meals Made...Ch. 8 - Total overhead, 3-variance analysis. Pampered...Ch. 8 - Production-volume variance analysis and...Ch. 8 - Overhead variances, service setting. Carlyle...Ch. 8 - Identifying favorable and unfavorable variances....Ch. 8 - Flexible-budget variances, review of Chapters 7...Ch. 8 - Comprehensive variance analysis. Cooking Whiz...Ch. 8 - Journal entries (continuation of 8-35). A. Prepare...Ch. 8 - Graphs and overhead variances. Best Around, Inc.,...Ch. 8 - Overhead variance, missing information. Consider...Ch. 8 - Flexible budgets, 4-variance analysis. (CMA,...Ch. 8 - Activity-based costing, batch-level variance...Ch. 8 - Overhead variances and sales-volume variance. The...Ch. 8 - Activity-based costing, batch-level variance...Ch. 8 - Comprehensive review of Chapters 7 and 8, working...Ch. 8 - Review of Chapters 7 and 8, 3-variance analysis....Ch. 8 - Nonfinancial variances. Kathys Kettle Potato Chips...Ch. 8 - Overhead variances, service sector. Cavio is a...Ch. 8 - Direct-cost and overhead variances, income...Ch. 8 - Overhead variances, ethics. Carpenter Company uses...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Possible causes for price and efficiency variances. You have been invited to interview for an internship with an international food manufacturing company. When you arrive for the interview, you are given the following information related to a ctitious Belgian chocolatier for the month of June. The chocolatier manufactures truffles in 12-piece boxes. The production is labor intensive, and the delicate nature of the chocolate requires a high degree of skill.arrow_forwardCheyenne Landscaping plants grass seed as the basic landscaping for business campuses. During a recent month, the company worked on three projects (Remington, Chang, and Wyco). The company is interested in controlling the materials costs, namely the grass seed, for these plantings projects.In order to provide management with useful cost control information, the company uses standard costs and prepares monthly variance reports. Analysis reveals that the purchasing agent mistakenly purchased poor-quality seed for the Remington project. The Chang project, however, received higher-than-standard-quality seed that was on sale. The Wyco project received standard-quality seed. However, the price had increased and a new employee was used to spread the seed.Shown below are quantity and cost data for each project. Actual Standard Project Quantity Costs Quantity Costs Total Variance Remington 530 lbs. $1,272 440 lbs. $1,100 $172 U Chang 400…arrow_forwardOriole Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies. Because the company's customers are governmental agencies, prices are strictly regulated. Therefore, Oriole Labs must constantly monitor and control its testing costs. Shown below are the standard costs for a typical test. Direct materials (2 test tubes @ $1.80 per tube) Direct labor (1 hour @ $32 per hour) Variable overhead (1 hour @ $7.00 per hour) Fixed overhead (1 hour @ $12.00 per hour) Total standard cost per test Direct materials (2,520 test tubes) Direct labor (1,248 hours) Variable overhead Fixed overhead $4,284 38,688 7,068 $3.60 14,940 32.00 The lab does not maintain an inventory of test tubes. As a result, the tubes purchased each month are used that month. Actual activity for the month of November 2022, when 1,200 tests were conducted, resulted in the following. 7.00 12.00 $54.60 Monthly budgeted fixed overhead is $16,320. Revenues for the month were $79,200,…arrow_forward
- Hart Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies. Because the company's customers are governmental agencies, prices are strictly regulated. Therefore, Hart Labs must constantly monitor and control its testing costs. Shown below are the standard costs for a typical test. Direct materials (2 test tubes @ $1.90 per tube) Direct labor (1 hour @ $30 per hour) Variable overhead (1 hour @ $6.00 per hour) Fixed overhead (1 hour @ $12.00 per hour) Total standard cost per test Direct materials (2,310 test tubes) Direct labor (1,133 hours) Variable overhead Fixed overhead $3.80 $4,158 32,857 6,336 12,672 30.00 6.00 12.00 The lab does not maintain an inventory of test tubes. As a result, the tubes purchased each month are used that month. Actual activity for the month of November 2020, when 1,100 tests were conducted, resulted in the following. $51.80 Monthly budgeted fixed overhead is $16,560. Revenues for the month were $73,700, and…arrow_forwardHart Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies. Because the company's customers are governmental agencies, prices are strictly regulated. Therefore, Hart Labs must constantly monitor and control its testing costs. Shown below are the standard costs for a typical test. Direct materials (2 test tubes @ $1.00 per tube) $2.00 Direct labor (1 hour @ $32 per hour) 32.00 Variable overhead (1 hour @ $6.00 per hour) 6.00 Fixed overhead (1 hour @ $13.00 per hour) 13.00 Total standard cost per test $53.00 The lab does not maintain an inventory of test tubes. As a result, the tubes purchased each month are used that month. Actual activity for the month of November 2020, when 1,400 tests were conducted, resulted in the following. Direct materials (2,940 test tubes) $2,646 Direct labor (1,442 hours) 44,702 Variable overhead 8,512 Fixed overhead 16,968 Monthly budgeted fixed overhead is $17,030. Revenues for the month were $93,800, and…arrow_forwardHart Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies. Because the company’s customers are governmental agencies, prices are strictly regulated. Therefore, Hart Labs must constantly monitor and control its testing costs. Shown below are the standard costs for a typical test. Direct materials (2 test tubes @ $1.46 per tube) $2.92 Direct labor (1 hour @ $24 per hour) 24.00 Variable overhead (1 hour @ $6 per hour) 6.00 Fixed overhead (1 hour @ $10 per hour) 10.00 Total standard cost per test $42.92 The lab does not maintain an inventory of test tubes. As a result, the tubes purchased each month are used that month. Actual activity for the month of November 2020, when 1,475 tests were conducted, resulted in the following. Direct materials (3,050 test tubes) $4,270 Direct labor (1,550 hours) 35,650 Variable overhead 7,400 Fixed overhead 15,000 Monthly budgeted fixed overhead is…arrow_forward
- Green Grow Incorporated (GGI) manufactures lawn fertilizer. Because of the product’s very high quality, GGI often receives special orders from agricultural research groups. For each type of fertilizer sold, each bag is carefully filled to have the precise mix of components advertised for that type of fertilizer. GGI’s operating capacity is 22,000 one-hundred-pound bags per month, and it currently is selling 20,000 bags manufactured in 20 batches of 1,000 bags each. The firm just received a request for a special order of 5,000 one-hundred-pound bags of fertilizer for $130,000 from APAC, a research organization. The production costs would be the same, but there would be no variable selling costs. Delivery and other packaging and distribution services would cause a one-time $2,500 cost for GGI. The special order would be processed in two batches of 2,500 bags each. (No incremental batch-level costs are anticipated. Most of the batch-level costs in this case are short-term fixed costs,…arrow_forwardDairyplus processes organic milk into plain yogurt. Dairyplus sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of $800, yields 570 gallons of plain yogurt. The company sells the one-gallon tubo for $8.00 each and spends $0.16 for each plastic tub. Dairyplus has recently begun to reconsider its strategy Management wonders if it would be more profitable to sell individual-sized portions of fruited organic yogurt at local food stores. Dairyplus could further process each batch of plain yogurt into 12.160 individual portions (3/4 cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Dairyplus would sell each individual portion for $0.50. Packaging would cost $0.05 per portion, and fruit would cost $0.11 per portion Fixed costs would not change. Should Dairyplus continue to sell only the gallon-sized plain yogurt (sell as is) or convert the plain yogurt into…arrow_forwardDairymaid processes organic milk into plain yogurt. Dairymaid sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of $800, yields 615 gallons of plain yogurt. The company sells the one-gallon tubs for $7.00 each and spends $0.14 for each plastic tub. Dairymaid has recently begun to reconsider its strategy. Management wonders if it would be more profitable to sell individual-sized portions of fruited organic yogurt at local food stores. Dairymaid could further process each batch of plain yogurt into 13,120 individual portions (3/4 cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Dairymaid would sell each individual portion for $0.40. Packaging would cost $0.05 per portion, and fruit would cost $0.10 per portion. Fixed costs would not change. Should Dairymaid continue to sell only the gallon-sized plain yogurt (sell as is) or convert the plain yogurt into…arrow_forward
- Naturalmaid processes organic milk into plain yogurt. Naturalmaid sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of $880, yields 750 gallons of plain yogurt. The company sells the one-gallon tubs for $5.00 each and spends $0.14 for each plastic tub. Naturalmaid has recently begun to reconsider its strategy. Management wonders if it would be more profitable to sell individual-sized portions of fruited organic yogurt at local food stores. Naturalmaid could further process each batch of plain yogurt into 16,000 individual portions (3/4 cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Naturalmaid would sell each individual portion for $0.58. Packaging would cost $0.06 per portion, and fruit would cost $0.10 per portion. Fixed costs would not change. Should Naturalmaid continue to sell only the gallon-sized plain yogurt (sell as is) or convert the plain yogurt…arrow_forwardPace Labs. Inc. provides mad cow disease testing for both state and federal governmental, agricultural agencies. Because the company's customers are governmental agencies, prices are strictly regulated. Therefore, Pace Labs must constantly monitor and control its testing costs. Shown below are the standard costs for a typical test. Direct materials (2 test tubes @ $1.46 per tube) $ 2.92 Direct Labor (1 hour @ $24 per hour) 24.00 Variable overhead (1 hour @ $6 per hour) 6.00 Fixed overhead (1 hour @ $10 per hour) 10.00 Total standard cost per test $42.92 The lab does not maintain an inventory of test tubes. Therefore, the tubes purchased each month are used that month. Actual activity for the month of November 2014, when 1,500 tests were conducted, resulted in the following. Direct materials (3,050 test…arrow_forwardPace Labs. Inc. provides mad cow disease testing for both state and federal governmental, agricultural agencies. Because the company's customers are governmental agencies, prices are strictly regulated. Therefore, Pace Labs must constantly monitor and control its testing costs. Shown below are the standard costs for a typical test. Direct materials (2 test tubes @ $1.46 per tube) $ 2.92 Direct Labor (1 hour @ $24 per hour) 24.00 Variable overhead (1 hour @ $6 per hour) 6.00 Fixed overhead (1 hour @ $10 per hour) 10.00 Total standard cost per test $42.92 The lab does not maintain an inventory of test tubes. Therefore, the tubes purchased each month are used that month. Actual activity for the month of November 2014, when 1,500 tests were conducted, resulted in the following. Direct materials (3,050 test…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Inspection and Quality control in Manufacturing. What is quality inspection?; Author: Educationleaves;https://www.youtube.com/watch?v=Ey4MqC7Kp7g;License: Standard youtube license