Question

Daley, Inc. is a privately held fumiture manufacturer. For August 2014, Daley had the following standards for one of its products, a wicker chair Direct materials Direct manufacturing labor The following data were compiled regarding actual performance: actual output units (chairs) produced, 2,000; square yards of input purchased and used, 5,700; price per square yard, $5.30; direct manufacturing labor costs, $10,692; actual hours Standards per Chair 3 square yards of input at S 5.20 per square yard 0.5 hour of input at S 10.70 per hour of input, 990; labor price per hour, $10.80. Read the reguirements Requirement 1. Shaw computations of price and efficiency variances for direct materials and direct manufacturing labor. Give a plausible explanation of why each variance occurred. Let's begin by determining the formula used to calculate the actual costs of direct materials, then enter the amounts in the formula and calculate the cost Actual cost Direct materials Next we will calculate the actual input at the budgeted price. 1. Show computations of price and efficiency variances for direct materials and direct manufacturing labor. Give a plausible explanation of why each variance occurred. Actual input Budgeted price Cost 2. Suppose 8,200 square yards of materials were purchased (at $5.30 per square Direct materials Direct manufacturing labor Determine the formula and calculate the costs for the flexible budget. yard), even though only 5,700 square yards were used. Suppose further that variances are identified at their most timely control point, accordingly, direct materials price variances are isolated and traced at the time of purchase to the purchasing department rather than to the production department. Compute the price and efficiency variances under this approach. -Flexible budget cost Direct materials Direct manufacturing labor Now compute the price and efficiency variances for direct materials and direct manufacturing labor. Label each variance as favorable (F) or unfavorable (U). Print Done variances variances Choose from any list or enter any number in the input fields and then continue to the next question.

Answer 1

Daley Inc. Requirement1: Actual cost Actual Input x Actual Price Actual Cost Direct Material 5700 x $5.30 30210 Direct Manufacturing = 990 x 10.80 = 10692 Cost Actual Input x Budgeted Price Direct Material 5700 x $5.2 29640 Direct Manufacturing - Actual Input x Budgeted Price -990 hours x $10.70 per hour 10593 Calculate costs for fleible budget: Flexible Budget Budgeted input for actual output x Budgeted Price Actual Cost Direct Material-6000 sq yards x $5.2-31200 Direct Manufacturing 1000 hrs x $10.70 $10700 Variances Variances 1560 F 107 F Direct Material 570 U Direct Manufacturing 99 U 30210 29640 570 10692 10593-99 31200 29640-1560 10700 10593107 Requirement 2: Actual Inputx Flexible Budgeted price budget cost Actual Cost Purchasing Production 43460 42640 29640 31200 8200 x 5.30 43460 8200 x 5.2 42640 Price Variance Efficiency Variance Direct Material 820 U 1560 F 43460 42640 820 31200 29640 1560