Question

Better By the Numbers began operations on January 1, 2018. The company produces eight- ounce bottles of hand and body lotion called Radiant One. The lotion is sold wholesale in 12- bottle cases for $95 per case. There is a selling commission of $20 per case. January 2018 direct materials, direct labor and factory overhead costs are as follows: DIRECT MATERIALS Cost Behavior Units per Case Cost per unit Nutrient base Essential oils Bottle (8-oz.) variable variable variable 100 oz. 30 oz. 12 bottles $ 0.06 $0.34 $ 0.60 Direct Materials Cost per Case $ 6.00 12.00 7.20 $ 25.20 DIRECT LABOR Department Cost Behavior Time per Case Labor Rate per Hour $ 20.00 $ 15.50 Mixing Filling variable variable 15 min. 6 min. 21 min. Direct Labor Cost per Case $5.00 1.55 $ 6.55

I need help on requirements #10-13. please explain. Thank you!

Answer 1

10. Material price variance= (standard price-Actual price)*Actual quantity

Nutrient base= (0.06-0.056)*102=0.408(Fav.)

Essential oils=(0.34-0.45)*31=3.41(Unfav.)

Bottles=(0.60-0.55)*12.5=0.625(Fav.)

Material quantity variance= (Standard qty. for actual output-Actual output)*Standard price

NB={[100/1600*1500]-102}*0.06=0.495(unfav.)

EO={[30/1600*1500]-31}*0.34=0.98(unfav.)

B={[12/1600*1500]-12.5}*0.60=0.75(unfav.)

11. Labour rate variance= (Standard rate-Actual rate)*Actual hours

Actual hours are converted into hours by dividing actual minutes by 60

Mixing= (20-20.25)*0.24=0.06(unfav.)

Filling= (15050-15)*0.091=0.045(fav.)

Labour time variance=(Standard hrs. for actual output-Actual hrs.)*Standard rate

Mixing= (0.23-0.24)*20=0.2(unfav.)

Filling= (0.0937-0.0916)*15.50=0.032(fav.)

12. Overhead controllable variance=Actual factory Overhead-(Fixed Expenses budgeted+variable expenses)

variable expenses= (standard hrs. for actual production*variable OH rate)

Variable OH rate=Variable OH/Budgeted Production

Putting all values,

OH controllable variance= 305-[9137+(458.43*12.13)]

=305-14968

=14393(unfav.)

13. Factory OH volume variance

i.) Budgeted fixed OH=9137

Budgeted units=1600

Actual units=1500

Fixed OH rate=9137/1600=5.71

Applied Fixed OH=1500*5.71=8565

Fixed OH volume variance=8565-9137=572(unfav.)

ii.) Budgeted variable OH=19412

Budgeted units=1600

Actual units=1500

Variable OH rate=19412/1600=12.13

Applied Variable OH=1500*12.13=18195

Variable OH volume variance=18195-19412=1217(unfav.)

Total OH volume variance=572+1217=1729(unfav.)