Question

Waterways Corporation uses very stringent standard costs in evaluating its manufacturing efficiency. These standards are not "ideal" at this point, but the management is working toward that as a goal. At present, the company uses the following standards Materials Item Per unit Cost 63 per lb. $100 per lb. Metal 1lb. Plastic 12 oz Rubber 4 oz 884 per lb. Direct labor Item Per unit Cost $8.00 per hr Labor 15 min Predetermined overhead rate based on direct labor hours $3.84 The January figures for purchasing, production, and labor are: The company purchased 230,000 pounds of raw materials in January at a cost of 79e a pound. Production used 230,000 pounds of raw materials to make 116,000 units in January. Direct labor spent 18 minutes on each product at a cost of $7.90 per hour Overhead costs for January totaled $45,089 variable and $71,000 fixed Answer the following questions about standard costs. What is the materials price variance? (Round per unit caiculations to 2 decimal piaces, eg. 1.25 and final answer to 0 decimal places, e.g. 125.) $ Materials price variance eTextbook and Media

Answer 1

Answer: bay Material price variance : Actual queantite xl actual prica-standards 1 (Note 1602 = 1 pound] plastie (12/10) = 0.75 Rubber Mic) = 0.25 standard price per unit - 18963 +0.75%/ +0.25 x0.88 = 0.63 +0.75 +0.25 1.6 per unit Material price variance = 230,000 x 0.79-1.6) - 230,000 x $0.81 - $186,300 Cfavorable) b) Material quantita variance, standard price (Actualqueauty-standards quantita -1.6x (230,000 - 232,000) = 3.200 (favorable) Note :- Total Material per unit = (1+0.7570.95).tb: & lb Total material for actual quantitas produced = 116,000 units xelb g) Total material variance - price variance + Quantity variance = 232,000 = $186,300 +3.2000 = $189.500 (favorable) d) Labor price variance = Acual hours x (Actual rate-standard rale) - x 132 )x 7.9 - 43). = 34,800x 40.1 = $3.480 (Favorable) e) Labor quantity variance : standard vale x Cactual hours - slauslavd howy - $8x{116,000 *1860 )-(118,000x15/160) = $8x(34,800 – 29,000) = $46,400 (un favorable) *) Total Labor variance - price variance + quantity variance - $3,480 Favorable) + $46400 (ua favorable) = $42,920 (un favorable)

X variance = standard overhead cost - Actual overhead cost =(116.000 X 15/60 )* $ 3.8H -6$ 45,089 +$71,000) = $111,360-$116,089 5 $4,729 (un favorable)