Question

Quivers Inc. began operations on January 1 of the current year. The company produces eight-ounce bottles of jet wax called Ophelia Shine. The wax is sold wholesale in 12-bottle cases for $100 per case. There is a seling commission of $20 per case. The January direct materials, direct labor and factory overhead costs are as Cost per Unit DIRECT MATERIALS Cost Units Behavior per Case Variable 100 oz. Variable 30 oz. Variable 12 bottles Cream base Natural oils Bottle (8-02) $0.02 Direct Materials Cost per Case $ 2.00 9.00 6.00 $17.00 0.30 0.50 Department Mixing Filling Cost Behavior Variable Variable DIRECTLABOR Time per Case 20 min. 5 25 min Labor Rate Per Hour $18.00 14.40 Direct Labor Cost per Case $6.00 120 5720 FACTORY OVERHEAD Cost Behavior Total Cost Utilities Mixed $ 600 Facility lease Fixed 14,000 Equipment depreciation Fixed 4,300 Supplies Fixed 660 $19,560

Answer 1

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10) DETERMINE AND INTERPRET THE DIRECT MATERIAL PRICE AND QUANTITY VARIANCES FOR THE THREE MATERIALS.

DIRECT MATERIAL PRICE VARIANCE

	cream base	natural oil	bottles
Actual price	0.016	0.32	0.42
standard price	0.02	0.3	0.5
Difference	-0.004	0.02	-0.08
Actual quantity (units)	153000	46500	18750
Direct material price variance	-612	930	-1500

ANALYSIS

· Cream base indicate favorable

· Natural oil indicate unfavorable

· Bottles indicates favorable

DIRECT MATERIAL QUANTITY MATERIAL

	cream base	natural oil	bottles
Actual quantity	153000	46500	18750
standard quantity	150000	45000	18000
Difference	3000	1500	750
Standard price	0.02	0.3	0.5
Direct material quantity variance	60	450	375

ANALYSIS

· Cream base indicate unfavorable

· Natural oil indicate unfavorable

· Bottles indicates unfavorable

11) DETERMINE AND INTERPRET THE DIRECT LABOR RATE AND TIME VARIANCES FOR THE TWO DEPARTMENTS

DIRECT LABOR RATE VARIANCE

	MIXING DEPARTMENT	FILLING DEPARTMENT
Actual rate	18.2	14
standard rate	18	14.4
Difference	0.20	-0.40
Actual time (hours)	488	140
Direct labor rate variance	97.6	-56

ANALYSIS

· Mixing department shows unfavorable

· Filling departments shows favorable

DIRECT LABOR TIME VARIANCE

	MIXING DEPARTMENT	FILLING DEPARTMENT
Actual time(hour)	488	140
standard time(hour)	500	125
Difference	-12	15
Standard rate	18	14.4
Direct labor time variance	-216	216

ANALYSIS

· Mixing department shows favorable

· Filling departments shows unfavorable

12) DETERMINE AND INTERPRET THE FACTORY OVERHEAD CONTROLLAB LE VARIANCE

Actual variable overhead	305
Variable overhead at standard cost	300
Factory overhead controllable variance	5

ANALYSIS

· Factory overhead controllable variance is unfavorable

13) DETERMINE AND INTERPRET THE FACTORY OVERHEAD VOLUME VARIANCE.

Normal volume (cases)	1600
Actual volume (cases)	1500
Difference	100
Fixed factory overhead rate	121625
Factory overhead volume variance	1216.25

ANALYSIS

· Factory overhead volume variance is unfavorable