Question

Baby its Cold Outside Inc. makes women’s and men’s overcoats. Both products require filler and lining material. The following planning information has been made available:

Standard Amounts

               Women’s Coats          Men’s Coats       Standard Price per unit

Filler               2.2 lbs/coat       3.5 lbs/coat       $1.00 per lb.

Liner               5.5 yds./coat       8.0 yds./coat       $6.50

Standard labor time       0.30 hrs   /coat       0.40 hrs/coat

Standard labor rate       $12.50 per hr.       $11.00 per hr

Planned production       3,000 coats       5,000 coats

Baby Its Cold Outside does not expect there to be any beginning or ending inventories of filler and lining material. At the end of the budget year, Baby Its Cold Outside experienced the following actual results:

Actual Amounts

              Actual Quantity Used       Actual Price per unit

Filler               24,800 lbs       $0.90 per lb.

Liner               56,500 yds       $6.75 per yd.

Women’s Coats       Men’s Coats  

Actual labor hours used       1,000           1,900

Actual labor rate       $12.70 per hr       $11.20 per hr

Actual production       3,200 coats       4,900 coats

Determine the price variance, quantity variance, and overall variance for direct material and direct labor for both the women’s coats and the men’s coats. Explain what the variances indicates and what are some possible causes for the variances?

Answer 1

Hi

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