Homework Answers
| 1. For direct material | |||||||||||
| Data for Material Variance | |||||||||||
| Standard | Actual | ||||||||||
| For 1 Unit | For 4200 Units | For 4200 Units | |||||||||
| Quantity in Ounces | Price in $ | Amount in $ | Quantity in Ounces | Price in $ | Amount in $ | Quantity in Ounces | Price in $ | Amount in $ | |||
| 2.4 | $ 27.00 | $ 64.80 | 10080 | $ 27.00 | $ 2,72,160.00 | Direct material purchase | 13000 | $ 25.40 | $ 3,30,200.00 | ||
| (4200units*2.40 ounces) | Less: Ending Inventory | -2850 | ($330200/13000) | ||||||||
| Direct material consumed | 10150 | $ 25.40 | $ 2,57,810.00 | ||||||||
| a) | |||||||||||
| Material Price variance=(Standard Price -Actual Price)*Actual Quantity Purchased | |||||||||||
| Material Price variance=($27 -$25.4)*13000 ounces | |||||||||||
| Material Price variance= $20800F | |||||||||||
| Material Quantity variance=(Standard Quantity -Actual Quantity Consumed)*Standard Price | |||||||||||
| Material Quantity variance=(10080 ounces -10150 ounces)*$27 | |||||||||||
| Material Quantity variance= $1890U | |||||||||||
| b) | |||||||||||
| Yankee distilling have favourable material price variance but quantity variance is unfavourable.There many reason for unfavourable quantity are | |||||||||||
| Purchase of lower quality material, unskilled labor, Poor condition of plant & machinery etc. As per the information provided in question the reason | |||||||||||
| for unfavourable quantity variance is purchased of material from new supplier, it may possible that material have lower quality. But overall material cost | |||||||||||
| Variance is favourable ($20800-$1890= $18910F).Therefore the company should sign contract on the condition that the material from new supplier not | |||||||||||
| reduce the quality of end product and also not increase labour cost variance. | |||||||||||
| 2. For direct labor | |||||||||||
| Data for Labor Variance | |||||||||||
| Standard | Actual | ||||||||||
| For 1 Unit | For 4200 Units | For 4200 Units | |||||||||
| Hours | Rate in $ | Amount in $ | Hours | Rate in $ | Amount in $ | Hours | Rate in $ | Amount in $ | |||
| 0.6 | $ 12.00 | $ 7.20 | 2520 | $ 12.00 | $ 30,240.00 | 3200 | $ 11.00 | $ 35,200.00 | |||
| (4200 units*0.60 hours) | (160 hours*20 employees) | ||||||||||
| a) | |||||||||||
| Labor Rate Variance=(Standard Rate -Actual Rate )*Actual Hours | |||||||||||
| Labor Rate Variance=($12 -$11)*3200 |
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Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit Standard Quantity or Hours 2.20 ounces 0.60 hours 0.60 hours Standard Price or Rate $23.00 per ounce $14.00 per hour $ 2.50 per hour Standard Cost $50.60 8.40 1.50 $60.50 During November,...