Question 12: The company has separate material and quantity standards for the shoes and jackets product lines. Assume the following standard price and quantities: For shoes, assume the budgeted cost per foot of leather (standard price) is $13.96 and the budgeted feet of leather per pair of shoes produced is 1.32. For jackets, assume the budgeted cost per foot of leather (standard price) is $19.87 and the budgeted feet of leather per jacket produced is 12.65. That is, the budgeted cost of direct materials to produce 1 jacket is $251.36 ($19.87 per ft * 12.65 ft per jacket). (Hint: Calculate the direct material price and efficiency variances for each job and sum all of the variances together.) 12a: What is the direct material price variance? Make sure you enter the number with the correct sign. Answer: DM Price Variance ($) Favorable/Unfavorable 12b: What is the direct material efficiency variance? Make sure you enter the number with the correct sign. Answer: DM Efficiency Variance ($) Favorable/Unfavorable
Added by Michael D.
Close
Step 1
- Direct Material Price Variance measures the difference between the actual cost of materials and the expected (or standard) cost of materials. It is calculated as (Actual Price - Standard Price) x Actual Quantity. - Direct Material Efficiency Variance measures Show more…
Show all steps
Your feedback will help us improve your experience
Akash M and 65 other Principles of Accounting educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Recommended Videos
Porter Ltd produces a single product. Three different materials are used in the manufacturing process. The materials may be substituted for one another within defined limits and the choice of the proportion of the various materials used is considered to be matter for the exercise of managerial discretion. The standard material cost for one unit of the final product is as follows: Standard cost: Material A: 3kg at 50p per kg = 1.50 Material B: 5kg at 80p per kg = 4.00 Material C: 2kg at 1.20p per kg = 2.40 7.90 During January the actual output was 30,000 units of the final product and the actual material cost was as follows: Material A: 95,000kg 47,000 Material B: 153,000kg 126,000 Material C: 57,000kg 75,000 305,000kg Required a) Calculate total material variance. (2 marks) b) Calculate the material price variance and material usage variances and discuss the benefits which can be gained by Porter Ltd from these calculations. (3 marks) c) Split the material usage variance into mix and yield and calculate the variances. (6 marks) d) Explain the meaning and implications of the mix and yield variances calculated in (c) above. (9 marks) (Total 20 marks)
Sri K.
Corporation produces a single product. The standard cost card for the product follows: Direct materials (4 yards $5 per yard) $20 Direct labor (1.5 hours $10 per hour) $15 Variable manufacturing overhead (1.5 hrs $4 per hour) $6 During the year, the company produced 8,840 units of product and incurred the following actual results: Materials purchased, 56,100 yards at $2.10 per yard $117,810 Materials used in production (in yards) 36,450 Direct labor cost incurred, 18,000 hours at $8.20 per hour $147,600 Variable manufacturing overhead cost incurred $57,400 Fixed manufacturing overhead cost incurred $117,000 Ignore the variable manufacturing overhead data. 1. The materials price variance far the period is:_____. A. $1,250 F. B. $1,500 F. C. $1,250 U. D. $1,500 U. 2. The materials quantity variance for the period is:_____. A. $950 U. B. $5,000 F. C. $1,000 U. D. $6,000 F. 3. The labor rate variance for the period is:_____. A. $3,150 U. B. $2,700 F. C. $2,700 U. D. $3,150 F. 4. The labor efficiency variance for the period is:_____. A. $3,000 U. B. $2,550 U. C. $2,550 F. D. $3,000 F.
Jonathan T.
Required information Overhead variances are due to differences between the actual overhead costs incurred and the overhead applied to production. The overhead controllable variance equals the actual overhead minus the budgeted overhead. The volume variance equals the budgeted fixed overhead minus the applied fixed overhead. B-Max Company Overhead Variance Report For the Month Ended June Volume Variance Expected: 500 units at 80% Capacity Actual: 400 units at 64% Capacity Volume Variance: $600 Unfavorable Controllable Variance | Flexible Budget | Actual Results | Variances Variable costs Indirect materials | $2,000 | $2,200 | $200 U Indirect labor | 1,200 | 1,175 | 25 F Utilities | 1,600 | 1,650 | 50 U Total variable costs | 4,800 | 5,025 | 225 U Fixed costs Depreciation - machinery | 2,000 | 2,000 | 0 Building rent | 1,000 | 1,000 | 0 Total fixed costs | 3,000 | 3,000 | 0 Total factory overhead | $7,800 | $8,025 | $225 U Knowledge Check 01 An overhead variance report includes: (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) ? Variable and fixed flexible budget costs ? Variable and fixed actual results ? Variable and fixed sales results
Akash M.
Recommended Textbooks
Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD