Question

In: Accounting

Koontz Company manufactures a number of products. The standards relating to one of these products are...

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 $3.20 per foot $

6.08

Actual: 1.85 feet at $3.60 per foot $ 6.66
Direct labor:
Standard: 1.00 hours at $19.00 per hour

19.00

Actual: 1.05 hours at $18.40 per hour 19.32
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 $

33.08

$ 33.96
Excess of actual cost over standard cost per unit $ 0.88

The production superintendent was pleased when he saw this report and commented: “This $0.88 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 15,500 units. Variable overhead cost is assigned to products on the basis of direct labor-hours. There were no beginning or ending inventories of materials.

1a. Compute the following variances for May, materials price and quantity variances.
1b. Compute the following variances for May, labor rate and efficiency variances.
1c. Compute the following variances for May, variable overhead rate and efficiency variances. (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.)

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1a. Materials price variance
Materials quantity variance
1b. Labor rate variance
Labor efficiency variance
1c. Variable overhead rate variance
Variable overhead efficiency variance

Solutions

Expert Solution

req 1-a
Std qty allowed (15500*1.90): 29450
Std price: 3.2
Actual Qty = 28675
Actual price 3.6
material price variance= Actual qty (Std price-Actual price)
28675 ( 3.2-3.6)= 11470 U
Material Qty variance =Std price (Std qty-Actual Qty)
3.20 ( 29450 -28675 ) = 2464 F
Std labour hours (1*15500): 15500 hours
Std rate: 19
Actual Hours (1.05*15500): 16275 hour
Actual rate: 18.40
Labor rate variance= Actual hours(Std rate-Actual rate)
16275 ( 19-18.40) = 9765 F
Labor efficiency variance= Std rate (Std hours-Actual hours)
19 (15500-16275) = 14725 U
Std OH rate per hour: 8
Actua OH rate per hour: 7.60
Variable OH rate variance = Actual hours (Std rate-Actual rate)
16275 (8-7.60) = 6510 F
Variable OH efficiency variance = Std rate (Std hourrs-Actual hours)
8.00 (15500-16275) = 6200 U

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