Problem 8-3 Materials and Labor Variances Analyses Zippy Inc. manufactures a fue
ID: 2590667 • Letter: P
Question
Problem 8-3 Materials and Labor Variances Analyses Zippy Inc. manufactures a fuel additive, Surge, which has a stable selling price of $44 per drum. The company has been producing and selling 80,000 drums per month. In connection with your examination of Zippy's financial statements for the year ended September 30, management has asked you to review some computations made by Zippy's cost accountant. Your working papers disclose the following about the company's operations: Standard costs per drum of product manufactured Materials $16 $17 $10 S 6 1 empty drum Factory Overhead.. Costs and expenses during September: Chemicals: 645,000 gallons purchased at a cost of $1,140,000; 600,000 gallons used Empty drums: 94,000 purchased at a cost of $94,000; 80,000 drums used Direct labor: 81,000 hours worked at a cost of $816,480. Factory overhead: $768,000 Required: Calculate the following for September. Compute the materials variances for both Surge and for the drums. If an amount is zero, enter "0" and use "NA" if the variance is zero. Use "F" and "U" to indicate favorable and unfavorable variances. Enter all amounts as positive numbers. Round unit costs to the nearest whole cent. 1. Materials quantity variance for Surge. Materials quantity variance for Drums. Materials purchase price variance for Surge Materials purchase price variance for Drums Labor efficiency variance Labor rate variance Select # Select # Select Select Select Select 2. 3. 4.Explanation / Answer
1 Material Quantity variance for surge (Standard Quantity for actual output-Actual Quantity for Actual output)Standard price (8*80000-600000)*2 80000 Material Quantity Variance for drum (Standard Quantity for actual output-Actual Quantity for Actual output)Standard price (80000-80000)*1 0 2 Material Price Variance for Surge (Standard Price-Actual price)*Actual Quantity (2-1140000/645000)*80000 16000 Material Price Variance for Drum (Standard Price-Actual price)*Actual Quantity (1-1)*80000 0 3 Labour efficiency variance (Standard hours for actual output-Actual Hours for Actual output)Standard Rate (1*80000-81000)*10 -10000 4 Labour Rate Variance (Standard Rate-Actual Rate)*Actual Hours (10-816480/81000)81000 -6480