Question

Please help to solve number 5. Also, i am confused with U or F for tasks 1-4, please check if you can. Thank you.

Gourmet, Inc. produces containers of frozen food. During October the company had the following actual production and costs. Actual Containers produced in October Variable Overhead Fixed Overhead Direct Labor cost Actual material purchased Actual Material pounds used 720 $5,700 $13,000 $80,000 Which is $28,000 Which is 3,900 Direct labor hours 15,000 pounds 14,600 pounds Overhead is budgeted and applied using direct-labor hours. Standard cost and annual budget information are as follows: Direct Labor Direct Material $19.75 $2.00 $99 $40 Standard cost per container 5 hours at 20 pounds at Direct labor 5 hours at Direct labor 5 hours at Variable overhead $1.50 $7.50 Fixed Overhead Total $3.00 $15 $161.25 Budgeted Monthly Fixed Overhead $12,500 Required: Make sure you do not forget to label the variances U or F. You need to show your work either by cell reference or showing your calculation to the side. antity variance. Please note that the materials price variance is based on actual material purchased and the quantity varian 720 20 Actual production Direct Material Standard quantity of material Standard rate of material Actual quantity of material used Actual rate of material Materials price variance Materials Quantity variance $2 $14,600 $1.87 $1,947 U ($400 U 2. Calculate the direct labor rate and efficiency variances. Standard hours of labor Actual hours of labor used Standard rate of labor Actual rate of labor Labor rate variance Labor Efficiency variance 3,600 3,900 $20 $20.51 ($2,975 U ($5,925) U 3. Calculate the variable overhead spending and efficiency variances. Standard rate of variable overhead Actual rate of variable overhead Variable overhead spending variance Variable overhead efficiency variance $1.50 $1.46 $150 F ($450.00) U 4. Calculate the fixed overhead budget variance. Budgeted monthly fixed overhead Acutal monthly fixed overhead Fixed overhead budget variance $12,500 $13,000 ($500) U 5. Pick out the two variances that you computed above that you think should be further investigated. Explain why you picked these 2 variances and what might be the possible cause of the variances.

Answer 1

Material Daiu Vasiiani Strandand price - Autwal paice) Athul Quantil 2- 18667) 44600 G 1947(E) (Favourable)__ - Material Quantity Variante (Standard Quantity - Actual Qiantety) Stande (14400 - 14600) 2 Sterne = 400(A). (Unfavourable) . Labour Rate Variance. Standard Rate - Actual Rate) Actual hour (19.75 – 20.5128) 3900 - 2975142 Labour efficiency varianu (Standard hours - Actual hours) Standar 3600 - 3900 (1975) = 5925 (U)

Variable spending Variance Actual bouns (Standard Rate - Altuial Rate) © Actual houis X Standard Rabe) - Autual Qus.head. based on Labouy hours (3900 x 105) - 57000 5850. - 5700 150 (F) Variable Efkivenly variante (Standard bowrs - Actual howus) _Standard Rake ( 3600 - 3900) 1.5 450 (0) Fizced Budgeted Oueshead Varanu. Budgeted Oueshead - Actual Overhead 12500 - 13000 - 50011

The two variances inuestigated are a that should be further ou moterial Quantity Variante As the material is the lower price & the material is favourable, the reason quantity Variance should be purchased at price variable for unfavourable found out. The reason for high quantity weabo usage might be because of the following • Wrong estado estimates of standard quanity • Wastage reason - Spoilage • Defective. etc efficiency a (b) Variabli Sporting Variante As the spending in Variable variance is less that the standard, the reason for Lower efficiency should be found out 4 -_- investigated - The reason for lower efficiency (high usage of Labour hours) are as follows- Abnormal Jalele time Less number of workers etc.