Question

F G H Variance Analysis 12 Special order lamps are manufactured in division S. Because of the precise nature of the process a 19 standard cost system has been developed. The following standards are used for the special orders: 20 21 . Standards Lamp Kits Direct Labor Variable Overhead * Fixed Overhead Total $ 16.000000 per lamp 2.400000 per lamp (4 lamps/hr.) 0.250000 per lamp (4 lamps/hr.) 10.000000 per lamp $ 28.650000 33 34 41 42 ** Fixed overhead is based on expected production of 4,014 customized lamps each month. 43 44 To keep records of the actual cost of a job, a Job Order Cost System has been developed. Entries 45 are made to the Job Order System at actual cost (overhead is applied based on actual labor hours) 52 while entries are made to the accounting system at standard. Variance analysis is used to analyze the 53 differences. 54 56 63 Job Order Costing Section 64 65 On January 1, 20x2. Division S began Job 1101 for the Client, THE BIG CHILDREN STORE. The 66 job called for 4,000 customized lamps. The following set of transactions occurred from 67 January 5 until the job was completed: 74 75 76 77 78 5-Jan Purchased 4,200 Lamp Kits @ $16.25 per kit. 9-Jan 4,050 sets of Lamp Kits were requisitioned. 17-Jan Payroll of 630 Direct Labor Hours @ $9.55 per hour. 30-Jan Payroll of 680 Direct Labor Hours @ $9.80 per hour. 30 Jan 3,986 lamps were completed and shipped. All materials requisitioned were used or scrapped. 88 89 96 98 100 Month End Overhead Information Actual Variable Overhead Actual Fixed Overhead $ 1,336.20 $ 41,123.45 108 709

Answer 1

1	No. of lamps completed = 3,986
2	Material price variance = AQ*SP - AQ *AP
			= 4,050 *16 - 4,050*16.25
			= - 1,012.50
3	Material usage variance = SQ*SP-AQ*SP
			= 3,986*16 - 4,050*16
			= - 1,024
4	Labour efficiency variance = SH*SR-AH*SR
			= (3986/4)*(2.4*4) - (630+680)*(2.4*4)
			= 3,009.60
5	Labour rate variance            = AH*SR-AH*AR
			= (630+680)*(2.4*4)-[(630*9.55)+(680*9.80)]
			= - 104.50