Check my work 4 \"Wonderful! Not only did our salespeople do a good job in meeti
ID: 2569137 • Letter: C
Question
Check my work 4 "Wonderful! Not only did our salespeople do a good job in meeting the sales budget this year, but our production people did a good job in controlling costs as well," said Kim Clark, president of Martell Company. "Our $22,700 overall manufacturing cost variance is only 6% of the $780,000 standard cost of products made during the year. That's well within the 3% parameter set by management for acceptable variances. It looks like everyone will be in line for a bonus this year. 14.28 points The company produces and sells a single product. The standard cost card for the product follows Print Standard Quantity or Hours 3.00 feet 3.00 per foot 1.2 hours11 per hour 1.2 hours $2.00 per hour 1.2 hours $5.50 per hour Standard Price or Rate Standard Cost References Inputs Direct materials Direct labor Variable overhead Fixed overhead $ 9.00 13.20 2.40 6.60 $31.20 Total standard cost per unit The following additional information is available for the year just completed: a. The company manufactured 25,000 units of product during the year. b. A total of 74,000 feet of material was purchased during the year at a cost of $3.20 per foot. All of this material was used to manufacture the 25,000 units produced. There were no beginning or ending inventories for the year. c. The company worked 33,000 direct labor-hours during the year at a direct labor cost of $10.70 per hour. d. Overhead is applied to products on the basis of standard direct labor-hours. Data relating to manufacturing overhead costs follow: Denominator activity level (direct labor-hours) Budgeted fixed overhead costs Actual variable overhead costs incurred Actual fixed overhead costs incurred 26,000 143,000 $ 72,600 140,200Explanation / Answer
1. Material price variance= Actual units purchases*(Standard price-Actual price)= 74000* (3- 3.2)= -14800 = 14800 U
Material quantity variance= Standard price* (Standard units required- Actual units used)= 3* (25000*3 - 74000)= 3000= 3000 F
2. Labor rate variance= Actual hours worked *(Standard rate -Actual rate)= 33000* (11-10.7)= 9900= 9900F
Labor efficiency variance= Standard rate* (Standard hours required- Actual hours worked)= 11* (25000*1.2 - 33000)= -33000= 33000 U
3a.
Actual variable OH rate per hour= 72600/33000= 2.2 per hour
Variable OH rate variance= Actual hours* ( Standard rate- Acutal rate)= 33000* (2-2.2)= -6600= 6600U
Variable OH efficiency variance= Standard rate* (Standard hours required- Actual hours)= 2* (25000*1.2-33000)= -6000= 6000U
3b. Fixed OH budget variance= Budgeted OH- Actual OH= 143000- 140200= 2800= 2800F
Fixed OH volume variance= Absorbed OH- Budgeted OH= 33000*5.5 - 143000= 38500= 38500F