Question

In: Accounting

Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products, a football helmet...

Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products, a football helmet for the North American market, requires a special plastic. During the quarter ending June 30, the company manufactured 3,600 helmets, using 2,700 kilograms of plastic. The plastic cost the company $20,520.

     According to the standard cost card, each helmet should require 0.68 kilograms of plastic, at a cost of $8.00 per kilogram.

Required:
1.

According to the standards, what cost for plastic should have been incurred to make 3,600 helmets? How much greater or less is this than the cost that was incurred? (Round Standard kilograms of plastic per helmet to 2 decimal places.)

     

2.

Break down the difference computed in (1) above into a materials price variance and a materials quantity variance. (Round your actual materials price to two decimal places, and round your final answers to the nearest whole dollar. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

     

SkyChefs, Inc., prepares in-flight meals for a number of major airlines. One of the company’s products is grilled salmon in dill sauce with baby new potatoes and spring vegetables. During the most recent week, the company prepared 7,200 of these meals using 2,800 direct labor-hours. The company paid these direct labor workers a total of $22,400 for this work, or $8.00 per hour.

     According to the standard cost card for this meal, it should require 0.40 direct labor-hours at a cost of $7.50 per hour.

   

Required:
1.

According to the standards, what direct labor cost should have been incurred to prepare 7,200 meals? How much does this differ from the actual direct labor cost? (Round labor-hours per meal and labor cost per hour to 2 decimal places.)

     

2.

Break down the difference computed in (1) above into a labor rate variance and a labor efficiency variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Sharp Company manufactures a product for which the following standards have been set:

Standard Quantity
or Hours
Standard Price
or Rate
Standard
Cost
  Direct materials 3 feet $ 5 per foot $ 15
  Direct labor ? hours ? per hour ?

     During March, the company purchased direct materials at a cost of $45,240, all of which were used in the production of 2,190 units of product. In addition, 4,500 hours of direct labor time were worked on the product during the month. The cost of this labor time was $31,500. The following variances have been computed for the month:

  Materials quantity variance $ 1,950 U  
  Labor spending variance $ 3,030 U  
  Labor efficiency variance $ 780 U  
Required:
1. For direct materials:
a.

Compute the actual cost per foot for materials for March. (Round your answer to 2 decimal places.)

          

b.

Compute the price variance and the spending variance. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance))

          

2.

For direct labor: (Do not round intermediate calculations.)

a.

Compute the standard direct labor rate per hour. (Round your final answer to 2 decimal places.)

            

b.

Compute the standard hours allowed for the month’s production.

            

c.

Compute the standard hours allowed per unit of product. (Round your answer to 1 decimal place.)

          

     

Solutions

Expert Solution

Question 1 :

Standard quantity * Standard price = Standard cost
Standard cost to manufacture3600 hemets 3600*.68=2448 8 19584

The standard cost is 20520 -19584 = 936 less than actual cost

b)

Formula
Material price variance

Actual cost- [AQ*SR]

20520-[2700*8]

20520- 21600

-1080 F (enter as 1080 F is needs to enter as positive value)

Material quantity variance SR[AQ-SQ]

8[2700-2448]

8* 252

2016 U

Question 2 :

Standard hours * Standard rate = Standard cost
Standard cost to produce 7200 meals 7200*.40= 2880 7.5 21600

The standard cost is 22400 -21600 = 800 less than actual cost

b)

Formula
Labor rate variance Actual cost-[AH*SR]

22400-[2800*7.5]

22400-21000

1400 U

Labor efficiency variance SR[AH-SH]

7.5[2800 - 2880]

7.5 * -80

- 600 F (enter as 600F)

Question 3 :

1a)Material quantity variance = SR[AQ-SQ ]

                        = 5 [AQ-(2190*3) ]

                       = 5[AQ- 6570]

       1950 = 5[AQ-6570]

       1950 /5 = [AQ-6570]

         390+6570 =AQ

         AQ= 6960

Actual cost per foot =Actual cost/actual quantity

                   = 45240 /6960

                   = $ 6.5 per foot

1b)Price variance = AQ[AR-SR]

                     = 6960 [6.5 -5]

                    = 6960 * 1.5

                    = 10440 U

Spending variance =Material price variance+Material quantity variance

                = 10440 U +1950 U

                = 12390 U

2a)Labor rate variance =Labor spending variance-Labor efficiency variance

                        = 3030 -780

                        = 2250 U

Labor rate variance =Actual cost-[AH*SR]

2250 = 31500 - [4500*SR]

4500*SR= 31500-2250

SR = 29250/4500

    = $ 6.5 per hour

standard direct labor rate per hour = $ 6.5 per hour

2b)Labor efficiency variance = SR[AH-SH]

     780 = 6.5 [4500-SH]

    780/6.5 = 4500-SH

    120=4500-SH

SH = 4500-120

            = 4380 Hours

Standard hours allowed for the month’s production = 4380 Hours

2c) standard hours allowed per unit of product = 4380/2190 = 2 hours per unit


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