Question

Catherine​'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, Catherine has a rigorous inspection process.

For quality control​ purposes, Catherine has a standard based on the pounds of chips inspected per hour and the number of pounds that pass or fail the inspection. Catherine expects that for every 6 comma 500 pounds of chips​ produced, 1 comma 300 pounds of chips will be inspected. Inspection of 1 comma 300 pounds of chips should take 1 hour. Catherine also expects that 4​% of the chips inspected will fail the inspection. During the month of​ May, Catherine produced 1 comma 560 comma 000 pounds of chips and inspected 240 comma 500 pounds of chips in 190 hours. Of the 240 comma 500 pounds of chips​ inspected, 10 comma 420 pounds of chips failed to pass the inspection.

1.

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.)

2.

Compute two variances that can be used to evaluate the percentage of the chips that fails the inspection.

Answer 1

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