Managerial ACCT Week 10 - Chapter 10 PDF

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Tutor/Lecturer: Syrus - These documents will come in handy for Semester 2 2018 and Semester 1 2019 students ...

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Week 10 Lecture 10 – Chapter 10: Standard Costs and Variances

Questions Question 1: What is a quantity standard? What is a price standard?

Question 3: Who is generally responsible for the materials price variance? The materials quantity variance? The labor efficiency variance?

Question 8: What effect, if any, would you expect poor-quality materials to have on direct labor variances?

Exercises

Question 1: Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products, a football helmet for the North American market, requires a special plastic. During the quarter ending June 30, the company manufactured 35,000 helmets, using 22,500 kilograms of plastic. The plastic cost the company $171,000.

According to the standard cost card, each helmet should require 0.6 kilograms of plastic, at a cost of $8 per kilogram

Required: 1. According to the standards, what cost for plastic should have been incurred to make 35,000 helmets? How much greater or less is this than the cost that was incurred?

2. Break down the difference computed in (1) above into a materials price variance and a materials quantity variance.

Question 2: SkyChefs, Inc., prepares in-flight meals for a number of major airlines. One of the company’s products is grilled salmon in dill sauce with baby new potatoes and spring vegetables. During the most recent week, the company prepared 4,000 of these meals using 960 direct labor-hours. The company paid these direct labor workers a total of $9,600 for this work, or $10.00 per hour. According to the standard cost card for this meal, it should require 0.25 direct labor-hours at a cost of $9.75 per hour.

Required: 1. According to the standards, what direct labor cost should have been incurred to prepare 4,000 meals? How much does this differ from the actual direct labor cost?

2. Break down the difference computed in (1) above into a labor rate variance and a labor efficiency variance.

Question 3: Logistics Solutions provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor-hours. In the most recent month, 120,000 items were shipped to customers using 2,300 direct laborhours. The company incurred a total of $7,360 in variable overhead costs. According to the company’s standards, 0.02 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.25 per direct labor-hour.

Required: 1. According to the standards, what variable overhead cost should have been incurred to fill the orders for the 120,000 items? How much does this differ from the actual variable overhead cost?

2. Break down the difference computed in (1) above into a variable overhead rate variance and a variable overhead efficiency variance.

Question 4: Erie Company manufactures a small mp3 player called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate mp3 player are as follows:

During August, 5,750 hours of direct labor time were needed to make 20,000 units of the Jogging Mate. The direct labor cost totaled $73,600 for the month

Required: 1. According to the standards, what direct labor cost should have been incurred to make 20,000 units of the Jogging Mate? By how much does this differ from the cost that was incurred?

2. Break down the difference in cost from (1) above into a labor rate variance and a labor efficiency variance.

3. The budgeted variable manufacturing overhead rate is $4 per direct laborhour. During August, the company incurred $21,850 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

Question 5: The auto repair shop of Quality Motor Company uses standards to control the labor time and labor cost in the shop. The standard labor cost for a motor tuneup is given below:

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 50 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Required: 1. Determine the number of actual labor-hours spent on tune-ups during the week.

2. Determine the actual hourly rate of pay for tune-ups last week.

Question 6: Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below:

During the most recent month, the following activity was recorded:

a) Twenty thousand pounds of material were purchased at a cost of $2.35 per pound. b) All of the material purchased was used to produce 4,000 units of Zoom. c) 750 hours of direct labor time were recorded at a total labor cost of $10,425

Required: 1. Compute the materials price and quantity variances for the month.

2. Compute the labor rate and efficiency variances for the month.

Question 8: Dawson Toys, Ltd., produces a toy called the Maze. The company has recently established a standard cost system to help control costs and has established the following standards for the Maze toy:

During July, the company produced 3,000 Maze toys. Production data for the month on the toy follow: 

Direct materials: 25,000 microns were purchased at a cost of $0.48 per micron. 5,000 of these microns were still in inventory at the end of the month.



Direct labor: 4,000 direct labor-hours were worked at a cost of $36,000

Required: 1. Compute the following variances for July:

a. The materials price and quantity variances. b. The labor rate and efficiency variances....