Question

ALL I NEED IS THE REST OF THE NUMBERS FOR PART 2 AND 3 THE REST ARE CORRECT.

Control Limits, Variance Investigation

Buenolorl Company produces a well-known cologne. The standard manufacturing cost of the cologne is described by the following standard cost sheet:

Direct materials:
Liquids (4.5 oz. @ $0.40) $1.80
Bottles (1 @ $0.05) 0.05
Direct labor (0.2 hr. @ $15.00) 3.00
Variable overhead (0.2 hr. @ $5.00) 1.00
Fixed overhead (0.2 hr. @ $1.50) 0.30
Standard cost per unit $6.15

Management has decided to investigate only those variances that exceed the lesser of 10% of the standard cost for each category or $20,000.

During the past quarter, 250,000 four-ounce bottles of cologne were produced. Descriptions of actual activity for the quarter follow:

A total of 1.35 million ounces of liquids was purchased, mixed, and processed. Evaporation was higher than expected (no inventories of liquids are maintained). The price paid per ounce averaged $0.42.
Exactly 250,000 bottles were used. The price paid for each bottle was $0.048.
Direct labor hours totaled 48,250, with a total cost of $733,000.

Normal production volume for Buenolorl is 250,000 bottles per quarter. The standard overhead rates are computed by using normal volume. All overhead costs are incurred uniformly throughout the year.

Required:

1. Calculate the upper and lower control limits for materials and labor.

Liquid standard $ 450,000
Upper control limit $ 470,000
Lower control limit $ 430,000

Bottle standard $ 12,500
Upper control limit $ 13,750
Lower control limit $ 11,250

Direct labor standard $ 750,000
Upper control limit $ 770,000
Lower control limit $ 730,000

2. Compute the total materials variance, and break it into price and usage variances. Would these variances be investigated?
If there is no variance, enter "0" in the amount box and select "No variance" from the dropdown menu.

Would it be investigated?
Total liquid variance $ Unfavorable
Materials price variance $ Unfavorable  
Materials usage variance $ 90,000 Unfavorable  

Total bottle variance $ 500 Favorable  
Materials price variance $ 500 Favorable
Materials usage variance $ 0 variance  

3. Compute the total labor variance, and break it into rate and efficiency variances. Would these variances be investigated? Round intermediate calculations to two decimal places, if necessary and round final answers to the nearest dollar.

Would it be investigated?
Total labor variance $ Favorable  
Labor rate variance $ 9,168 Unfavorable  
Labor efficiency variance $ 26,250 Favorable  

Answer 1

2.

Total Liquid Variances		117000	Unfavourable
Material price variance		27000	Unfavourable
Material quantity variance		90000	Unfavourable
Total Bottle Variances		26500	Favourable
Material price variance		26500	Favourable
Material quantity variance		0

Standard liquid cost = 250,000 x $1.80 = $450,000

Liquid quantity variances will be investigated as the variance is above 10% of the standard cost of $450,000

Working:

Material Variances
Liquid
Std. Qty per bottle (oz)		4.5
Production (bottles)		250000
Std. Qty for production (oz)	A	1125000
Std. cost per oz ($)	B	0.4
Actual Quantity used (oz)	C	1350000
Actual cost per oz ($)	D	0.42
Material Qty.Variance	E	90000	Unfavourable
(A-C) x B
Material Price Variance	F	27000	Unfavourable
(B-D) x C
Total Liquid Variances (E+F)	G	117000	Unfavourable
Bottles
Std. Qty per bottle (nos)		1
Production (bottles)		250000
Std. Qty for production (nos)	A	250000
Std. cost per oz ($)	B	0.05
Actual Quantity used (nos)	C	250000
Actual cost per oz ($)	D	0.048
Material Qty.Variance	E	0
(A-C) x B
Material Price Variance	F	500	Favourable
(B-D) x C
Total Bottle Variances (E+F)	G	500	Favourable

3.

Standard labor hours per unit	A	0.2
Production units	B	250000
Standard labor hours for production A X B	C	50000
Standard labor rate per hour	D	15.00
Actual labor hours worked	E	48250
Acual labor rate per hour (733,000 / 48,250)	F	15.19
Labor rate Variance (D-F) x E	G	9250	Unfavourable
Labor efficiency variance (C-E) x D	H	26250	Favourable
Total labor cost variance	I	17000	Favourable

Labor variances will not be investigated.as the variance is below 10% of the standard cost of $750,00(250,000 x $3)