Question

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 $4.40 per foot	$	8.36
Actual: 1.85 feet at $4.80 per foot							$	8.88
Direct labor:
Standard: 0.95 hours at $18.00 per hour		17.10
Actual: 1.00 hours at $17.50 per hour								17.50
Variable overhead:
Standard: 0.95 hours at $6.00 per hour		5.70
Actual: 1.00 hours at $5.60 per hour								5.60
Total cost per unit	$	31.16					$	31.98
Excess of actual cost over standard cost per unit				$	0.82

The production superintendent was pleased when he saw this report and commented: “This $0.82 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 18,500 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. How much of the $0.82 excess unit cost is traceable to each of the variances computed.

(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Round your answers to 2 decimal places.)

	Materials: Price variance Quantity variance 0.00 Labor: Rate variance Efficiency variance 0.00 Variable overhead: Rate variance Efficiency variance    0.00 Excess of actual over standard cost per unit $0.00

2. How much of the $0.82 excess unit cost is traceable to apparent inefficient use of labor time? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations. Round your final answers to 2 decimal places.)

positive values. Do not round intermediate calculations. Round your final answers to 2 decimal places.)

	Excess of actual over standard cost per unit          Less portion attributable to labor inefficiency: Labor efficiency variance Variable overhead efficiency variance 0.00 Portion due to other variances $0.00

Answer 1

1. How much of the $0.82 excess unit cost is traceable to each of the variances computed.
(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Round your answers to 2 decimal places.)
Materials:
Price variance (13690/18500)	0.74	U
Quantity variance (4070/18500)	0.22	F	0.52	U
Labor:
Rate variance (9250/18500)	$          0.50	F
Efficiency variance (16650/18500)	$          0.90	U	$         0.40	U
Variable overhead:
Rate variance (7400/18500)	$          0.40	F
Efficiency variance (5550/18500)	$          0.30	U	$         0.10	F
Excess of actual over standard cost per unit			0.82	U
Materials price variance = *AQ x  (AP – SP)
Materials price variance = 34,225 x  (4.80 – 4.40)	13,690.00	U
*AQ = 18500 x 1.85	34,225.00	units
Materials quantity variance = SP (AQ – SQ**)
Materials quantity variance = 4.40 x  (34225 – 35150 )	4,070.00	F
**SQ = 18500 x  1.90	35,150.00	units
Actual hours = 18,500 units × 1 hours per unit =	18500	hours
Standard Hours = 18500 units × 0.95 hours per unit =	17575	hours
Labor rate variance = AH  x (AR – SR)
Labor rate variance =  18500 hours ($17.50 per hour – $18.00 per hour)	$   9,250.00	F
Labor efficiency variance = SR  x (AH – SH)
Labor efficiency Variance = $18.00 per hour (18,500 hours – 17575 hours)	$ 16,650.00	U
Actual hours = 18,500 units × 1 hours per unit =	18500	hours
Standard Hours = 18500 units × 0.95 hours per unit =	17575	hours
Variable overhead rate variance = AH (AR – SR)
Variable overhead rate variance =  18500 hours ($5.60 per hour – $6.00 per hour)	$   7,400.00	F
Variable overhead efficiency variance = SR (AH – SH)
Variable overhead efficiency variance = $6 x   (18,500 hours – 17575 hours)	$   5,550.00	U
2. How much of the $0.82 excess unit cost is traceable to apparent inefficient use of labor time? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations. Round your final answers to 2 decimal places.)
positive values. Do not round intermediate calculations. Round your final answers to 2 decimal places.)
Excess of actual over standard cost per unit			0.82	U
Less portion attributable to labor inefficiency:
Labor efficiency variance	$          0.90	U
Variable overhead efficiency variance	$          0.30	U	$         1.20	U
Portion due to other variances			$         0.38	F