Question

M ODUCTION TO MANAGEMENT ACCOUNTING Problem 4: Standard Costing & Variance Analysis (15 Points) ummm Sushi Company makes fresh box lunches daily that sell for $6.00 each. Each lunch has the following standard costs: Standard Standard Quantity or Hours Price or Rate Direct Materials ........ ... 0.5 lbs. $6.00 per lb. Direct Labor ................ 0.1 hour $ 10.00 per hour Variable Overhead ... 1.0 box $ 0.50 per box The company has no beginning inventories and achieved its target sales price last month. In addition, it provided the following information: Actual Sales............. ........... 4,800 lunches Actual Boxes Used .............................................4,750 boxes Direct Materials Used........ .... 2,700 lbs. Direct Materials Purchased ............... ............. 3,000 lbs. Actual Direct Labor Hours ......... .... 750 hours Actual Direct Materials Purchased ................... $ 17,400 Actual Direct Labor Cost ......... ............. $ 6,750 Actual Variable Overhead Cost..... Required: In the appropriate section of the Answer Book, please: a. Compute the Direct Materials Quantity (i.e., Usage) Variance. ... ......$ 2,640 b. Compute the Direct Materials Price Variance. c. Compute the Direct Labor Efficiency Variance d. Compute the Direct Labor Rate (i.e., Price) Variance. e. Compute the Variable Overhead Efficiency Variance. f. Compute the Variable Overhead Rate (i.e., Price) Variance. g. A short analysis and explanation regarding the shop's performance over the month. Be precise in your explanation by citing relevant facts from your analysis.

Answer 1

(a) irect Maturial Ubage Varuance Standard- Actual) Quantity X Standard Rate (0.Sx4800)-2700 6 $ (1800) Unfavo U ralle 1 (b) Direet Matarial Prite Vauiane Standard-Actual) Rate X Standard 9ty ($6- $ 14,400 2700 x 2400 $480 FavouTabk 11 (d) Direct labour Price Uariance Std Rate ( $10 Actual Rate) x Std. HouYS $6750 750 4800x0.l) $ 480 Pavou rable (e) oirect Labour Eficieney varian ce Actual Hrs) X std. Rate. Std. Hrs 17 4800x 0.)5 O 10 = $ (2700) Unlavourable

(e) vaiable OH Jartiaunce Std. ban Poxes Actual Boxes) x Std Rate LLs00x1) 25 Favourable CVariable OH Rate Uariance Std. Pate Actual Rate) Std. Boxus Lsoso - 40o KA) $ (240 Unfavourable B2640 4750 (4500x1) 0.50- ( From the above uauiance analysis, we can conclude Direct Material labour Pr icu waiances are that Avowrable budt usage uauian as Vax. on Price vaiane is unlavovralale but eyheieney are unfavourable But Janiance is favovrable