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Problem 10-13 Basic Variance Analysis; the Impact of Variances on Unit Costs [LO10-1, LO10-2, LO10-3] Koontz...
Problem 10-13 Basic Variance Analysis; the Impact of Variances on Unit Costs [LO10-1, LO10-2, LO10-3]
Koontz Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for May.
| Standard Cost per Unit | Actual Cost per Unit | |||||||
| Direct materials: | ||||||||
| Standard: 1.90 feet at $3.00 per foot | $ |
5.70 |
||||||
| Actual: 1.85 feet at $3.40 per foot | $ | 6.29 | ||||||
| Direct labor: | ||||||||
| Standard: 1.00 hours at $18.00 per hour |
18.00 |
|||||||
| Actual: 1.05 hours at $17.40 per hour | 18.27 | |||||||
| Variable overhead: | ||||||||
| Standard: 1.00 hours at $8.00 per hour | 8.00 | |||||||
| Actual: 1.05 hours at $7.60 per hour | 7.98 | |||||||
| Total cost per unit | $ |
31.70 |
$ | 32.54 | ||||
| Excess of actual cost over standard cost per unit | $ | 0.84 | ||||||
The production superintendent was pleased when he saw this report and commented: “This $0.84 excess cost is well within the 4 percent limit management has set for acceptable variances. It's obvious that there's not much to worry about with this product."
Actual production for the month was 15,000 units. Variable overhead cost is assigned to products on the basis of direct labor-hours. There were no beginning or ending inventories of materials.
Required:
1. Compute the following variances for May:
a. Materials price and quantity variances.
b. Labor rate and efficiency variances.
c. Variable overhead rate and efficiency variances.
2. How much of the $0.84 excess unit cost is traceable to each of the variances computed in (1) above.
3. How much of the $0.84 excess unit cost is traceable to apparent inefficient use of labor time?
Solutions
Expert Solution
Solution 1a:
Material price variance= (SP - AP) * AQ = ($3 - $3.40) *
(15000*1.85) = $11,100 U
Materail quantity variance = (SQ - AQ) * SP = (15000*1.90 - 15000*1.85) * $3 = $2,250 F
Solution 1b:
Labor rate variance = (SR - AR) * AH = (18 - 17.40) * (15000 * 1.05) = $9,450 F
Labor efficiency variance = (SH - AH) * SR = (15000*1 - 15000*1.05) * $18 = $13,500 U
Solution 1c:
Variable overhead rate variance = (SR - AR) * AH = (8 - 7.60) * (15000 * 1.05) = $6,300 F
Variable overhead efficiency variance = (SH - AH) * SR = (15000*1 - 15000*1.05) * $8 = $6,000 U
Solution 2:
| Statement showing Excess unit cost traceable to variance - Koontz Company | ||||
| Variance | ||||
| Materials: | ||||
| Price Variance | $11,100.00 | U | ||
| Quantity Variance | $2,250.00 | F | $0.59 | U |
| Labor: | ||||
| Rate variance | $9,450.00 | F | ||
| Efficiency variance | $13,500.00 | U | $0.27 | U |
| Variable overhead: | ||||
| Rate variance | $6,300.00 | F | ||
| Efficiency variance | $6,000.00 | U | $0.02 | F |
| Excess of actual cost over standard cost per unit | $0.84 | U | ||
Solution 3:
| Statement showing Excess unit cost traceable to variance | ||||
| Variance | ||||
| Excess of actual over standard cost per unit | $0.84 | U | ||
| Less: Portion attributable to labor efficiency: | ||||
| Labor Efficiency variance | $13,500.00 | U | ||
| Variable overhead Efficiency variance | $6,000.00 | U | $1.30 | U |
| Portion due to other variances | $0.46 | F | ||
ekkarill92 answered 2 years agoRelated Solutions
Problem 10-13 Basic Variance Analysis; the Impact of Variances on Unit Costs [LO10-1, LO10-2, LO10-3] Koontz...
Problem 10-13 Basic Variance Analysis; the Impact of Variances
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Koontz Company manufactures a number of products. The standards
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actual cost data for May.
Standard Cost per Unit
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Standard: 1.90 feet at $4.80 per foot
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Becton Labs, Inc., produces various chemical compounds for
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Becton Labs, Inc., produces various chemical compounds for
industrial use. One compound, called Fludex, is prepared using an
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costs for one unit of Fludex, as follows:
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or Hours
Standard Price
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$
25.00
per ounce
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Becton Labs, Inc., produces various chemical compounds for
industrial use. One compound, called Fludex, is prepared using an
elaborate distilling process. The company has developed standard
costs for one unit of Fludex, as follows:
Standard Quantity
or Hours
Standard Price
or Rate
Standard Cost
Direct materials
2.20
ounces
$
25.00
per ounce
$
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Direct labor
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Variable manufacturing overhead
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Problem 10-14 Basic Variance Analysis [LO10-1, LO10-2, LO10-3] Becton Labs, Inc., produces various chemical compounds for...
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Becton Labs, Inc., produces various chemical compounds for
industrial use. One compound, called Fludex, is prepared using an
elaborate distilling process. The company has developed standard
costs for one unit of Fludex, as follows:
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or Hours
Standard Price
or Rate
Standard Cost
Direct materials
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$
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per ounce
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Becton Labs, Inc., produces various chemical compounds for
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Standard Quantity
or Hours
Standard Price
or Rate
Standard Cost
Direct materials
2.30
ounces
$
24.00
per ounce
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Direct labor
0.80
hours
$
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Variable manufacturing overhead
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Problem 10-14 Basic Variance Analysis [LO10-1, LO10-2, LO10-3] Becton Labs, Inc., produces various chemical compounds for...
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Becton Labs, Inc., produces various chemical compounds for
industrial use. One compound, called Fludex, is prepared using an
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costs for one unit of Fludex, as follows:
Standard
Quantity
Standard Price
or Rate
Standard Cost
Direct
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2.5
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$
20.00
per ounce
$
50.00
Direct labor
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$
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Variable
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costs for one unit of Fludex, as follows:
Standard Quantity
or Hours
Standard Price
or Rate
Standard Cost
Direct materials
2.5
ounces
$
20.00
per ounce
$
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Direct labor
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