Problem 11-4 (Part Level Submission) K&J Web Designs creates Web sites for busin

Question

Problem 11-4 (Part Level Submission)

K&J Web Designs creates Web sites for businesses. K&J has a basic Web site creation package that it offers for a flat fee of $770. This package includes everything that a business would need to have a simple but functional Web site built. K&J estimates that each of these Web sites should take, on average, 8.3 hours of Web designer time. K&J pays its Web design employees an average of $36 per hour.

Last month, K&J sold and built 150 Web sites for $770 each. Web design employees worked a total of 890 hours at a total payroll cost of $41,830.

a.

Calculate the labor rate and efficiency variances for the past month. (Enter all variances as a positive number.)

b. Calculate the standard amount of contribution margin (sales price less variable labor cost) that K&J would expect to make on an average Web site. (Round answer to 0 decimal places, e.g. 125.)

c. Calculate the actual amount of contribution margin (sales price less variable labor cost) that K&J made, on average, on each Web site in the past month.(Round answer to 0 decimal places, e.g. 125.)

* Kindly please show workings. Thank you

Explanation / Answer

a)

1) Labor rate variance = (Actual Rate-Standard Rate)*Actual Hour

Labor rate variance = (41830/890 - 36)*890

Labor rate variance = $ 9790 Unfavorable

2) Labor efficiency variance = (Actual Hour-Standard Hour )Standard Rate

Labor efficiency variance = (890 - 8.3*150)*36

Labor efficiency variance = 12780 Favorable

b)

Contribution margin = (sale price - standard variable cost)

Contribution margin = (770 - 8.3*36)

Contribution margin = $ 471.20

c)

Actual contribution margin = (sale price - Actual variable cost)

Actual contribution margin = (770 - 41830/150)

Actual contribution margin = $ 491

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