Question

SuperiorSuperior

?Guard, which used a standard cost accounting? system, manufactured

220 comma 000220,000

boat fenders during the? year, using

1 comma 640 comma 000 feet1,640,000 feet

of extruded vinyl purchased at

$ 1.15$1.15

per foot. Production required

4 comma 7004,700

direct labor hours that cost

$ 16.00$16.00

per hour. The materials standard was

77

feet of vinyl per fender at a standard cost of

$ 1.30$1.30

per foot. The labor standard was

0.0270.027

direct labor hour per fender at a standard cost of

$ 14.50$14.50

per hour.

Compute the price and quantity variances for direct materials. Compute the rate and efficiency variances for direct labor.
2.	Does the pattern of variances suggest that the? company's managers have been making? trade-offs? Explain.

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Requirement 1. Compute the price and quantity variances for direct materials. Compute the rate and efficiency variances for direct labor. ?(Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variances as favorable? (F) or unfavorable? (U). Abbreviations? used: DM? = Direct? materials, DL? = Direct? labor.)

Begin with the variances for direct materials.? First, determine the formula for the direct materials price? variance, then compute the price variance for direct materials. ?(Assume that the quantity of materials purchased is equal to the quantity of materials? used.)

		x (		-		)	=	DM price variance
		x (		-		)	=

Determine the formula for the direct materials quantity? variance, then compute the quantity variance for direct materials.

		x (		-		)	=	DM quantity variance
		x (		-		)	=

?Next, compute the variances for direct labor.? First, determine the formula for the rate? variance, then compute the rate variance for direct labor.

		x (		-		)	=	DL rate variance
		x (		-		)	=

Determine the formula for direct labor the efficiency? variance, then compute the efficiency variance for direct labor.

		x (		-		)	=	DL efficiency variance
		x (		-		)	=

Requirement 2. Does the pattern of variances suggest that the? company's managers have been making? trade-offs? Explain.

The

?

favorable

unfavorable

direct materials price variance combined with the

?

favorable

unfavorable

direct materials quantity variance suggests that managers may have used

?

higher-quality

lower-quality

materials. The net effect is

?

unfavorable

favorable

.The

?

favorable

unfavorable

direct labor rate variance combined with the

?

favorable

unfavorable

direct labor efficiency variance suggests that managers may have used

?

higher-paid

lower-paid

workers who performed

moremore

efficiently. The net effect is

?

favorable

unfavorable

.

Choose from any list or enter any number in the input fields and then continue to the next question.

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Answer 1

Solution 1:

Standard quantity of material = 220000 * 7.7 = 1694000 Feet

Actual quantity of material = $1640000 feet

Standard price of material = $1.30 per feet

Actual price of material = $1.15 per feet

Direct material price variance = (SP - AP) * AQ = ($1.30 - $1.15) * 1640000 = $246,000 F

Direct material quantity variance = (SQ - AQ) * SP = (1694000 - 1640000)*$1.30 = $70,200 F

Standard hours of direct labor = 220000 * 0.027 = 5900 hours

Actual hours of direct labor = 4700 hours

Standard rate of labor = $14.50 per hour

Actual rate of labor = $16 per hour

Direct labor rate variance = (SR - AQ) * AH = ($14.50 - $16) * 4700 = $7,050 U

Direct labor efficiency variance = (SH - AH) * SR = (5900 - 4700) * $14.50 = $17,400 F

Solution 2:

The favorable direct materials price variance combined with the favorable direct materials quantity variance suggests that managers may have used "lower-quality materials". The net effect is favorable.

The unfavourable direct labor rate variance combined with the unfavorable direct labor efficiency variance suggests that managers may have used "higher-paid workers who performed more efficiently." The net effect is favorable.