In: Accounting
The answer is given below with detailed step and calculation formula so that it is easy to understand and learn:
Step 1 | ||||
Production Pounds | 6500 | |||
Inspection Pounds | 1300 | |||
Inspection to Production ratio | =1300:6500 | 0.2 | ||
Step 2 | ||||
Actual Production | 1560000 | |||
Standard inspection Quantity | =1560,000 * 0.20 | 312000 | ||
Standard inspection Quanity in 1 hr | 1300 | |||
Standard Time for standard inspection (hrs) | =312000/1300 | 240 | ||
Standard failure | =312000 * 4% | 12480 | ||
Step 3 | Standard Time for standard inspection (hrs) | 240 | A | |
Actual inspection Quantity | 240500 | |||
Standard inspection Quanity in 1 hr | 1300 | |||
Standard Time for actual inspection (hrs) | =240500/1300 | 185 | B | |
Actual Time | 190 | C | ||
Total Variance | =A-C | 50 | Favourable | |
Quantity Variance | =A-B | 55 | Favourable | |
Efficiency Variance | =B-C | 5 | Unfavourable | |
Step 4 | Standard Failure for standard inspection | 12480 | A | |
Actual inspection Quantity | 240500 | |||
Standard fail actual inspection | =240500*4% | 9620 | B | |
Actual Fail | 10420 | C | ||
Total Variance | =A-C | 2060 | Favourable | |
Quantity Variance | =A-B | 2860 | Favourable | |
Quality Variance | =B-C | 800 | Unfavourable |