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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 $4.80 per foot $

9.12
Actual: 1.85 feet at $5.20 per foot $ 9.62
Direct labor:
Standard: 1.45 hours at $20.00 per hour

29.00
Actual: 1.50 hours at $19.50 per hour 29.25
Variable overhead:
Standard: 1.45 hours at $10.00 per hour 14.50
Actual: 1.50 hours at $9.60 per hour 14.40
Total cost per unit $

52.62

 $ 53.27
Excess of actual cost over standard cost per unit $ 0.65

The production superintendent was pleased when he saw this report and commented: “This $0.65 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 19,500 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. 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 $0.65 excess unit cost is traceable to each of the variances computed in (1) above.

3. How much of the $0.65 excess unit cost is traceable to apparent inefficient use of labor time?

Solutions

Expert Solution

ans 1
a) in $
Direct Materials Price Variance 14430 Unfavorable
(AQ*AP)-(AQ*SP)
36075*(5.2-4.8)
AQ=19500*1.85 36075
Direct Materials Quantity Variance 4680 Favorable
SP*(AQ-SQ allowed)
4.8*(36075-(19500*1.9))
b)
Direct Labor Rate Variance 14625 Favorable
AH*(AR-SR)
29250*(19.5-20)
AH=19500*1.5 29250
Direct Labor Efficiency Variance 19500 Unfavorable
20*(29250-(19500*1.45)
ans c
Variable overhead Rate Variance 11700 Favorable
AH*(AVR-SVR)
29250*(9.6-10)
AH=19500*1.5 29250
Variable overhead Efficiency Variance 9750 Unfavorable
10*(29250-(19500*1.45)
Ans 2
Material
Price variance   14430/19500 0.74
Qty variance -0.24 0.5 F
Labor
Rate variance -0.75
Efficiency variance 1 0.25 U
Vraible overhead
Rate variance -0.6
Efficiency variance 0.5 -0.1 F
Excess of actual over standard cost per unit 0.65
Note all variance per unit is calculated as Variance/19500 units
ans 3
Excess of actual over standard cost per unit 0.65 U
Labor efficiency variance 1
Variable overhead Efficiency Variance 0.5
1.5 U
Portion due to other variance -0.85 F
If any doubt please comemnt

ekkarill92 answered 2 years ago
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