Ruby Company produces a chair for which the standard specifies 3 yards of material per unit. The standard price of one yardof material is $9.40. During the month, 6,500 chairs were manufactured, using 19,300 yards at a cost of $8.93 per yard.Determine the following: Enter favorable variances as negative numbers.a. Direct materials price varianceb. Direct materials quantity variancec. Total direct materials cost variance%24%24%24

(a) Calculate the direct material quantity variance. Working note: Calculate the standard…

Answered: Ruby Company produces a chair for which…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter8: Standard Costs And Variances

Section: Chapter Questions

Problem 5EA: Sitka Industries uses a cost system that carries direct materials inventory at a standard cost. The...

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In all of the exercises involving variances, use F and U to designate favorable and unfavorable variances, respectively. E8-1 through E8-5 use the following data: The standard operating capacity of Tecate Manufacturing Co. is 1,000 units. A detailed study of the manufacturing data relating to the standard production cost of one product revealed the following: 1. Two pounds of materials are needed to produce one unit. 2. Standard unit cost of materials is 8 per pound. 3. It takes one hour of labor to produce one unit. 4. Standard labor rate is 10 per hour. 5. Standard overhead (all variable) for this volume is 4,000. Each case in E8-1 through E8-5 requires the following: a. Set up a standard cost summary showing the standard unit cost. b. Analyze the variances for materials and labor. c. Make journal entries to record the transfer to Work in Process of: 1. Materials costs 2. Labor costs 3. Overhead costs (When making these entries, include the variances.) d. Prepare the journal entry to record the transfer of costs to the finished goods account. Standard unit cost; variance analysis; journal entries 1,000 units were started and finished. Case 1: All prices and quantities for the cost elements are standard, except for materials cost, which is 8.50 per pound. Case 2: All prices and quantities for the cost elements are standard, except that 1,900 lb of materials were used.
Kavallia Company set a standard cost for one item at 328,000; allowable deviation is 14,500. Actual costs for the past six months are as follows: Required: 1. Calculate the variance from standard for each month. Which months should be investigated? 2. What if the company uses a two-part rule for investigating variances? The allowable deviation is the lesser of 4 percent of the standard amount or 14,500. Now which months should be investigated?
Ed Co. manufactures two types of O rings, large and small. Both rings use the same material but require different amounts. Standard materials for both are shown. At the beginning of the month, Edve Co. bought 25,000 feet of rubber for $6.875. The company made 3,000 large O rings and 4,000 small O rings. The company used 14,500 feet of rubber. A. What are the direct materials price variance, the direct materials quantity variance, and the total direct materials cost variance? B. If they bought 10,000 connectors costing $310, what would the direct materials price variance be for the connectors? C. If there was an unfavorable direct materials price variance of $125, how much did they pay per toot for the rubber?
The management of Golding Company has determined that the cost to investigate a variance produced by its standard cost system ranges from 2,000 to 3,000. If a problem is discovered, the average benefit from taking corrective action usually outweighs the cost of investigation. Past experience from the investigation of variances has revealed that corrective action is rarely needed for deviations within 8% of the standard cost. Golding produces a single product, which has the following standards for materials and labor: Actual production for the past 3 months follows, with the associated actual usage and costs for materials and labor. There were no beginning or ending raw materials inventories. Required: 1. What upper and lower control limits would you use for materials variances? For labor variances? 2. Compute the materials and labor variances for April, May, and June. Identify those that would require investigation by comparing each variance to the amount of the limit computed in Requirement 1. Compute the actual percentage deviation from standard. Round all unit costs to four decimal places. Round variances to the nearest dollar. Round variance rates to three decimal places so that percentages will show to one decimal place. 3. CONCEPTUAL CONNECTION Let the horizontal axis be time and the vertical axis be variances measured as a percentage deviation from standard. Draw horizontal lines that identify upper and lower control limits. Plot the labor and material variances for April, May, and June. Prepare a separate graph for each type of variance. Explain how you would use these graphs (called control charts) to assist your analysis of variances.
The normal capacity of a manufacturing plant is 30,000 direct labor hours or 20,000 units per month. Standard fixed costs are 6,000, and variable costs are 12,000. Data for two months follow: For each month, make a single journal entry to charge overhead to Work in Process, to close Factory Overhead, and to record variances. Indicate the types of variances and state whether each is favorable or unfavorable. (Hint: You must first compute the flexible-budget and production-volume variances.)
Corolla Manufacturing has a standard cost for steel of $20 per pound for a product that uses 4 pounds of steel. During September, Corolla purchased and used 4,200 pounds of steel to make 1,040 units. They paid $20.75 per pound for the steel. Compute the direct materials price variance, the direct materials quantity variance, and the total direct materials cost variance for the month of September. What would change if Corolla had made 2,200 units?
At the beginning of the year, Lopez Company had the following standard cost sheet for one of its chemical products: Lopez computes its overhead rates using practical volume, which is 80,000 units. The actual results for the year are as follows: (a) Units produced: 79,600; (b) Direct labor: 158,900 hours at 18.10; (c) FOH: 831,000; and (d) VOH: 112,400. Required: 1. Compute the variable overhead spending and efficiency variances. 2. Compute the fixed overhead spending and volume variances.
Direct materials variances Bellingham Company produces a product that requires 2.5 standard pounds per unit. The standard price is 3.75 per pound. If 15,000 units used 36,000 pounds, which were purchased at 4.00 per pound, what is the direct materials (A) price variance, (B) quantity variance, and (C) cost variance?
Use the following information to complete Brief Exercises 10-36 and 10-37: Ambient Inc. produces aluminum cans. Each can has a standard labor requirement of 0.03 hour. During the month of May, 500,000 cans were produced using 14,000 labor hours @ 15.00. The standard wage rate is 14.50 per hour. 10-37 Labor Rate and Efficiency Variances Refer to the information for Ambient Inc. above. Required: Calculate the labor rate and efficiency variances using the columnar and formula approaches.
Buenolorl Company produces a well-known cologne. The standard manufacturing cost of the cologne is described by the following standard cost sheet: Management has decided to investigate only those variances that exceed the lesser of 10% of the standard cost for each category or 20,000. During the past quarter, 250,000 four-ounce bottles of cologne were produced. Descriptions of actual activity for the quarter follow: a. A total of 1.35 million ounces of liquids was purchased, mixed, and processed. Evaporation was higher than expected. (No inventories of liquids are maintained.) The price paid per ounce averaged 0.42. b. Exactly 250,000 bottles were used. The price paid for each bottle was 0.048. c. Direct labor hours totaled 48,250, with a total cost of 733,000. Normal production volume for Buenolorl is 250,000 bottles per quarter. The standard overhead rates are computed by using normal volume. All overhead costs are incurred uniformly throughout the year. (Note: Round unit costs to the nearest cent and total amounts to the nearest dollar.) Required: 1. Calculate the upper and lower control limits for materials and labor. 2. Compute the total materials variance, and break it into price and usage variances. Would these variances be investigated? 3. Compute the total labor variance, and break it into rate and efficiency variances. Would these variances be investigated?
Control Limits During the last 6 weeks, the actual costs of labor for Solsana Company were as follows: The standard materials cost for each week was 40,000 with an allowable deviation of 5,000. Required: Plot the actual costs over time against the upper and lower limits. Comment on whether or not there is a need to investigate any of the variances. Use the following information to complete Brief Exercises 10-34 and 10-35: Young Inc. produces plastic bottles. Production of 16-ounce bottles has a standard unit quantity of 0.45 ounce of plastic per bottle. During the month of June, 240,000 bottles were produced using 110,000 ounces of plastic. The actual cost of plastic was 0,042 per ounce, and the standard price was 0,045 per ounce. There is no beginning or ending inventories of plastic.
Marten Company has a cost-benefit policy to investigate any variance that is greater than 1,000 or 10% of budget, whichever is larger. Actual results for the previous month indicate the following: The company should investigate: a. neither the materials variance nor the labor variance. b. the materials variance only. c. the labor variance only. d. both the materials variance and the labor variance.

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