Picard Landscaping plants grass seed as the basic landscaping for business campu
ID: 2483025 • Letter: P
Question
Picard Landscaping plants grass seed as the basic landscaping for business campuses. During a recent month, the company worked on three projects (Remington, Chang, and Wyco). The company is interested in controlling the materials costs, namely the grass seed, for these plantings projects.
In order to provide management with useful cost control information, the company uses standard costs and prepares monthly variance reports. Analysis reveals that the purchasing agent mistakenly purchased poor-quality seed for the Remington project. The Chang project, however, received higher-than-standard-quality seed that was on sale. The Wyco project received standard-quality seed. However, the price had increased and a new employee was used to spread the seed.
Shown below are quantity and cost data for each project.
Actual
Standard
a) prepare a variance report for the purchasing department , b) prepare a variance report for the production department
Actual
Standard
Project Quantity Costs Quantity Costs Total Variance Remington 540 lbs. $1,296 450 lbs. $1,170 $126 U Chang 400 920 410 1,066 146 F Wyco 590 1,593 500 1,300 293 U Total variance $273 UExplanation / Answer
a)
Actual price = Actual costs / Actual quantity
Standard price = Standard costs / Standard quantity
Material Price Variance = Actual Quantity * (Actual Price – Standard Price)
PICARD LANDSCAPING
Variance Report – Purchasing Department
Project
Actual pounds purchased
Actual price
Standard Price
Price Variance
Explanation
Remington
540
$1,296/540 lbs.
$ 2.40
$1,170/450 lbs.
$ 2.60
540 * ($2.40 - $2.60)
$ 108.00
F
Purchased poor quality seeds
Chang
400
$920/400 lbs.
$ 2.30
$1,066/410 lbs.
$ 2.60
400 * ($2.30 - $2.60)
$ 120.00
F
Seeds on sale
Wyco
590
$1,593/590 lbs.
$ 2.70
$1,300/500 lbs.
$ 2.60
590 * ($2.70 - $2.60)
$ 59.00
U
Price increased
Total price variance
$169.00
F
b)
Material Quantity Variance = Standard Price * (Actual Quantity – Standard Quantity)
PICARD LANDSCAPING
Variance Report – Production Department
Project
Actual pounds purchased
Standard Pounds
Standard Price
Quantity Variance
Explanation
Remington
540
450
$1,170/450 lbs.
$ 2.60
$2.60 * (540-450)
$ 234.00
U
Purchased poor quality seeds
Chang
400
410
$1,066/410 lbs.
$ 2.60
$2.60 * (400-410)
$ 26.00
F
Purchased higher quality seeds
Wyco
590
500
$1,300/500 lbs.
$ 2.60
$2.60 * (590-500)
$ 234.00
U
New Employee
Total quantity variance
$ 442.00
U
PICARD LANDSCAPING
Variance Report – Purchasing Department
Project
Actual pounds purchased
Actual price
Standard Price
Price Variance
Explanation
Remington
540
$1,296/540 lbs.
$ 2.40
$1,170/450 lbs.
$ 2.60
540 * ($2.40 - $2.60)
$ 108.00
F
Purchased poor quality seeds
Chang
400
$920/400 lbs.
$ 2.30
$1,066/410 lbs.
$ 2.60
400 * ($2.30 - $2.60)
$ 120.00
F
Seeds on sale
Wyco
590
$1,593/590 lbs.
$ 2.70
$1,300/500 lbs.
$ 2.60
590 * ($2.70 - $2.60)
$ 59.00
U
Price increased
Total price variance
$169.00
F