Crash! Forgot to do a backup! Hard drive is toast! You have lost a portion of ac
ID: 2448844 • Letter: C
Question
Crash! Forgot to do a backup! Hard drive is toast! You have lost a portion of accounting information from Jordan and Taylor. Admitting your mistake will not only shake their confidence, but might also end your brownie deliveries. They are coming over to discuss variances in a couple hours.
The only information available from your calculations are the variances. You don't want to admit the actual values for those calculations are lost!!!
You still have the following standards.
Selling price to Yumminess at $10 per tin. The cost is $8 per tin, which includes $6 of direct material and $1.50 of direct labor. Direct labor is 1 hour per 100 tins. Annual manufacturing overhead is estimated at $100,000 for the expected sales of 200,000 tins. The breakdown for manufacturing overhead includes 85% of variable costs.
Hint...Answer part d first.
a. The Material Price Variance is $16,800 U. What was the actual price per tin of direct material?
b. The Labor Quantity Variance is $300 U. How many actual hours were worked?
c. The Controllable Variance is $3250 U. What was the total dollar amount for actual manufacturing overhead?
d. The Volume Variance is $750 F. How many units were produced during the year?
Explanation / Answer
Ans:
(d): Nos. of units produced during the year:
Volume Variance =(Actual Quantity Sold- Budgeted Quantity Sold)* Budgeted Price
750= (Actual Quantity Sold-200000)*10
Actual Quantity Sold= 200000+75
= 200075 Units of Tin
(a) Actual price per tin of direct material:
Here material price variance is $ 16,800 (U)
Material Price Variance = Actual Cost- Standard Cost of Actual Quantity
-16800 = (Actual Quantity* Actual Price)- (Actual Quantity* Standard Price)
-16800= (200075*Actual Price)- (200075*6)
-16800= (200075*Actual price)- 1200450
Actual Price = (1200450-16800)/200075
= $ 5.916
(b ) Actual Hours Worked
Direct Labour Quantity Variance = (Standard Hours- Actual Hours)* Standard Rate
-300 = (2000.75- Actual Hours)*1.5
-200-2000.75=- Actual Hours
Actual Price = 2200.75
(c ) the total dollar amount for actual manufacturing overhead
Controllable Variance= Actual overhead expense - (budgeted overhead per unit x standard number of units)
-3250= Actual Overhead Expenses –(15000)
Actual Overhead Expenses = 18250