Question

1. We are analyzing 2 products – product Hamburgers(HB)and Double Deckers(DD)
   • Product HB requires 1 Patty (P) and 2 Buns (B)
   • Product Y requires 2 Patties (P) and 3 Buns B)
   • The standard cost for P is $1 per unit.
   • The standard cost for B is $0.50 per unit.
   • During this month, the company purchased 5,000 Ps for $4,950 (there was no beginning balance).
   • During this month, the company purchased 5,000 units of Bs for $2,600. (there was no beginning balance).
   • During the month the company produced 500 HBs and 1000 DDs.
   • During the month the company used 2520 units of Ps and 3975 units of Bs.
   • Payroll was $315, with 16 hours (this is actual - direct labor only).
   • Each burger requires 1/100 of an hour for Direct Labor
   • Labor standard cost is $20 per hour.

hint: for production of both X and Y

Questions 1-27: Find: Direct labor Total Variance (fav/unf), Patty - Use (Quantity) Variance, P - Price Variance (fav/unf), Buns-- Actual Cost (total), DL -- Flex Budget, Rate Variance (Labor Price), B- Flex Budget, P - Direct Material Total Variance (Fav/Unf), P - Flex Budget , DL Efficiency Variance (Labor Quantity), P - Direct Material Total Variance, P - Actual Cost (total) , Rate (Labor Price) Variance (fav/unf), B - Standard Cost (Total), DL - Efficiency (labor quantity) variance (fav/unf), B - Use variance (Fav/Unf), DL - Actual Cost (Total), B - Direct Material Total Variance, P - Use (Quantity) Variance (fav/unf), DL Total Variance, B - Use (Quantity) Variance, B - Direct Material Total Variance (fav/unf), B - Price Variance (fav/unf), B - Price Variance, P - Price Variance, P - Standard Cost (total), DL - Standard Cost (Total), Using Direct Labor Hours, what is the total allocation of overhead costs to HB using the "traditional" method?

2.Use the information given in Problem I.

Use standard cost information for all calculations except as noted below.

Department	$Costs	Activity Cost Driver
Frying	$375	Patties
Baking	$480	Buns

Questions 28-49: What is the Total Unit ABC Cost of HB?,Using Direct Labor Hours, what is the allocation rate using the "traditional" method?, Using Direct Labor Hours, what is the total unit cost of DD using the "traditional" method?, What is the Overhead Unit ABC Cost of DD?, What is the Direct Labor Cost per unit for HB (using standards), What is the Direct Material Cost per unit for HB (using standards), What is the ABC allocation of Frying Cost to HB?, What is the ABC allocation of Baking Cost to DD?, What is the Direct Material Cost per unit for DD (using standards), What is the Total Unit ABC Cost of DD?, What is the ABC allocation of Baking Cost to HB?, What is the ABC allocation Rate for Baking?, Using Direct Labor Hours, what is the total allocation of overhead costs to DD using the "traditional" method?, What is the ABC allocation Rate for Frying?, What is the Direct Labor Cost per unit for DD (using standards), What is the ABC allocation of Frying Cost to DD?, What is the Overhead Unit ABC Cost of HB?, Using Direct Labor Hours, what is the total unit cost of HB using the "traditional" method? (round to cents), Using Direct Labor Hours, what is the Over head unit cost of HB using the "traditional" method? (round to cents), Using Direct Labor Hours, what is the Over head unit cost of DD using the "traditional" method?

Answer 1

Answer 1-27: Calculation of Direct Material Price, Material Usage and Total Material Variance

Direct Material Price Variance = (Standard Direct Material Price - Actual Direct Material Price)

x Actual Direct Material used

Material Patty (P) = [$1 per unit - ($4,950 / 5000 units) x 2520 units

= ($1 per unit - $ 0.99 per unit) x 2520 units

= 25.2 Favourable

Material Buns (B) =[$0.50 per unit - $2,600 / 5000 units) x 3975 units

=($0.50 per unit - $0.52 per unit) x 3975 units

=79.5 Favourable

Total Direct Material Price Variance = Price Variance Material Patty (P) + Price Variance Material Buns (B)

= 25.2 Favourable + 79.5 Favourable

= 104.7 Favourable

Direct Material Usage Variance = (Standard Direct Material used - Actual Direct Material used)

x Standard Direct Material price

Material Patty (P) = [(500 HB x 1 patty) + (1000 DD x 2 Patties) - 2520 units] x  $1 per unit

= [(500 + 2000)units - 2520 units] x $1 per unit

= 20 Unfavourable

Material Buns (B) =[(500 HB x 2 buns) + (1000 DD x 3 buns) - 3975 units] x  $0.50 per unit

= [(1000 + 3000)units - 3975 units] x $0.50 per unit

= 12.5 Favourable

Total Direct Material Usage Variance = Usage Variance Material Patty (P) + Usage Variance Material Buns (B)

= 20 Unfavourable + 12.5 Favourable

= 7.5 Unfavourable

Direct Material Variance = Material Price Variance + Material Usage Variance

Material Patty (P) =25.2 Favourable + 20 Unfavourable

= 5.2 Favourable

Material Buns (B)=79.5 Favourable + 12.5 Favourable

=92 Favourable

Total Material Variance = Direct material Vatiance Patty (P) + Direct material Variance Buns(B)

= 5.2 Favourable + 92 Favourable

= 97.2 Favourable

Direct labor rate Variance = (Standard Direct labor rate - Actual Direct labor rate)

x Actual Direct labor hours

=[$20 per hour - ( $ 315 / 16 hours)] x 16 hours

=($20 per hour - $ 19.69 hour) x 16 hours

=4.96 Favourable

Direct labor Efficency Variance = (Standard Direct labor hours - Actual Direct labor hours)

x Standard Direct labor rate

  =[(500 HBs x 1/100 hours) +(1000 DDs x 1/100 hours) - 16 hours] x $20 per hour

=[(5 hours + 10 hours) - 16 hours] x $20 per hour

= 20 Unfavourable

Direct Labor Variance = Direct labor rate Variance + Direct labor Efficency Variance

=4.96 Favourable + 20 Unfavourable

=15.04 Unfavourable

Answer 28:Calculation of Overhead rate under traditional method

=   Total Overhead / Total Direct labor hours

=($ 375 + $ 480) / 16 hours

=$53.44 per direct labor hours

Calacutation of overhead rate under ABC Method

Department	$ costs	Activity Driver	No. of Activity	Cost per Activity
Frying	$375	Patties	2500 patties (500 HB x 1 patty) + (1000 DD x 2 Patties)	$ 0.15 per patties
Baking	$480	Buns	4000 Buns (500 HB x 2 buns) + (1000 DD x 3 buns)	$ 0.12 per Buns

Calculation of Allocation of Overhaed under ABC Method

Department	Product HBs	Product DD
Frying	$ 75 (500 Patties x $ 0.15 per patties)	$ 150 (1000 patties x $ 0.15 per patties)
Baking	$ 120 (1000 Buns x $ 0.12 per Buns)	$ 360 (3000 Buns x $ 0.12 per Buns)
Total	$ 195	$ 510

Direct Labor Cost per unit for HB (using standards)

= ($20 per hour x 5 hours) / 500 units

=$ 0.20 per unit

Direct Labor Cost per unit for DD (using standards)

=($20 per hour x 10 hours) / 1000 units

=$0.20 per unit

Direct Material Cost per unit for HB (using standards)

=($1 per unit x 500 Patties) + ($0.50 per unit x 1000 buns) / 500 HBs

=$ 1000 / 500 Hbs

=$ 2 per Hbs

Direct Material Cost per unit for DD (using standards)

=($1 per unit x 2000 Patties) + ($0.50 per unit x 3000 buns) / 1000 DD

=$ 3500 / 1000 DD

=$ 3.5 per DD