Question

Koontz Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for Mav Actual Cost per Unit Standard Cost per Unit Direct materials: Standard: 1.80 feet at $3.00 per foot Actual: 1.80 feet at $3.30 per foot $5.40 5.94 Direct labor Standard: e.90 hours at $18.00 per hour Actual: 0.92 hours at $17.50 per hour 16.20 16.10 Variable overhead: Standard : 0.98 hours at $5.00 per hour Actual: θ.92 hours at $4.50 per hour 4.50 4.14 $26.10 $26.18 Total cost per unit Excess of actual cost over standard cost per unit The production superintendent was pleased when he saw this report and commented: "This $0.08 excess cost is well within the 2 percent limit management has set for acceptable variances. It's obvious that there's not much to worry about with this product." Actual production for the month was 12,000 units. Variable overhead cost is assigned to products on the basis of direct labor-hours There were no beginning or ending inventories of materials

Answer 1

(1A) Calculate the materials price and quantity variances Material price variance- AQ (AP SP) -21,600 feet (S3.30 per foot S3.00 per foot) 21,600 feet (S0.30 per foot) -$6,480 Therefore, the material price variance (MPV) is S6480ū Calculate the materials quantity variance Material quantity variance SP (AQ -SQ) -S3.00 per foot (21,600 feet 12,000 units x 1.80 feet) -S3.00 per foot (21,600 feet - 21,600 feet) -S3.00 per foot(0) Therefore, the material quantity variance (MQV) is none that is zero variance (1B) Calculate the labor rate and efficiency variance labor rate variance = AH (AR-SR) 11,040 hours (S17.50 per hour 18.00 per hour) -S5,520F Therefore, the labor rate variance is S5,520 F Calculate the labor efficiency variance labor efficiency variance SR (AH - SH) - $18.00Per hour 11,040 hours -12,000 units x 0.90 hopurs per unit) -$18.00 per hour (11,040 hours 10,800 hours) -S4,320 Therefore, the labor efficiency variance is $4.320 U

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