Piedmont Manufacturing produces metal products with the following standard quantity and cost information: Direct Material Aluminum 4 sheets @ $4 $16 Copper 3 sheets @ $8 24 Direct labor 7 hours @ $16 112 Variable overhead 5 machine hours @ $6 30 Fixed overhead 5 machine hours @ $4 20 Overhead rates were based on normal monthly capacity of 3,600 machine hours. During November, the company produced only 510 units because of a labor strike, which occurred during union contract negotiations. After the dispute was settled, the company scheduled overtime to try to meet regular production levels. The following costs were incurred in November: Material Aluminum 2,400 sheets purchased @ $3.80 Used 2,100 sheets Copper 1,800 sheets purchased @ $8.40 Used 1,560 sheets Direct Labor Regular time 3,120 hours @ $16 (pre-contract settlement) Regular time 540 hours @ $17 (post-contract settlement) Variable Overhead $13,980 (based on 2,505 machine hours) Fixed Overhead $11,310 (based on 2,505 machine hours) a. Determine the following variances for November. Note: Do not use negative signs with your answers. a. Total material price variance $Answer Answer b. Total material usage (quantity) variance $Answer Answer c. Labor rate variance $Answer Answer
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Comprehensive
Piedmont Manufacturing produces metal products with the following standard quantity and cost information:
Direct Material | |||
Aluminum | 4 | sheets @ $4 | $16 |
Copper | 3 | sheets @ $8 | 24 |
Direct labor | 7 | hours @ $16 | 112 |
Variable |
5 | machine hours @ $6 | 30 |
Fixed overhead | 5 | machine hours @ $4 | 20 |
Overhead rates were based on normal monthly capacity of 3,600 machine hours.
During November, the company produced only 510 units because of a labor strike, which occurred during union contract negotiations. After the dispute was settled, the company scheduled overtime to try to meet regular production levels. The following costs were incurred in November:
Material | |||||
---|---|---|---|---|---|
Aluminum | 2,400 | sheets purchased @ $3.80 | Used | 2,100 | sheets |
Copper | 1,800 | sheets purchased @ $8.40 | Used | 1,560 | sheets |
Direct Labor | |||
---|---|---|---|
Regular time | 3,120 | hours @ $16 (pre-contract settlement) | |
Regular time | 540 | hours @ $17 (post-contract settlement) |
Variable Overhead | |||
---|---|---|---|
$13,980 | (based on | 2,505 | machine hours) |
Fixed Overhead | |||
---|---|---|---|
$11,310 | (based on | 2,505 | machine hours) |
a. Determine the following variances for November.
Note: Do not use negative signs with your answers.
a. Total material price variance $Answer
Answer
b. Total material usage (quantity) variance $Answer
Answer
c. Labor rate variance $Answer
Answer
d. Labor efficiency variance $Answer
Answer
e. Variable overhead spending variance $Answer
Answer
f. Variable overhead efficiency variance $Answer
Answer
g. Fixed overhead spending variance $Answer
Answer
h. Volume variance $Answer
Answer
i.
Answer
b. Prepare the
Note: Record any multiple debits or any multiple credits in alphabetical order by account name.
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