Problem 11-4 K&J Web Designs creates Web sites for businesses. K&J has a basic W

Question

Problem 11-4

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 $760. 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, 8.8 hours of Web designer time. K&J pays its Web design employees an average of $38 per hour. Last month, K&J sold and built 140 Web sites for $760 each. Web design employees worked a total of 810 hours at a total payroll cost of $37,260.

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

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.)

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.)

Labor Rate Variance $ Neither Unfavorable nor Favorable / UnfavorableFavorable Labor Efficiency Variance $ Unfavorable / Favorable / Neither Unfavorable nor Favorable

Explanation / Answer

Direct Labor Rate Variance: = Actual Quantity x Actual Rate - Actual Quantity x Standard Rate = Actual Cost - Standard Cost of Actual Hours Actual Quantity 140 web sites Actual rate ($ 37260 / 810 hours) 46 per hour Standard rate 38 per hour Direct Labor Rate Variance: (140 x 46) - (140 x 38) 1120 Favourable Direct Labor Effciency Variance: = Actual Hours x Standard Rate - Standard Hours x Standard Rate = Standard Cost of Actual Hours - Standard Cost Actual Hours 810 hours standard rate $ 38 per hour standard hours 1232 (140*8.8 hours per web site) Direct Labor Rate Variance: (810 x 38) - (1232 x 38) -16036 Adverse Contribution Margin Sales - Variable expenses Sales sales 106400 (140 x 760) Variable expenses 37260 Actual amount of contribution margin (Sales - Actual Variable cost)/ Sales (106400-37260)/106400*%                 64.98 % standard amount of contribution margin (Sales - Standard Variable cost)/ Sales Standard variable cost (140*8.8*38) 46816 standard amount of contribution margin (106400-46816)/106400% 56 %

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---