Waterways Corporation uses very stringent standard costs in evaluating its manufacturing efficiency. These standards are not “ideal” at this point, but the management is working toward that as a goal. At present, the company uses the following standards. Materials Item Per unit Cost Metal 1 lb. 63¢ per lb. Plastic 12 oz. $1.00 per lb. Rubber 4 oz. 88¢ per lb. Direct labor Item Per unit Cost Labor 15 min. $8.00 per hr. Predetermined overhead rate based on direct labor hours = $4.68 The January figures for purchasing, production, and labor are: The company purchased 231,800 pounds of raw materials in January at a cost of 78¢ a pound. Production used 231,800 pounds of raw materials to make 117,000 units in January. Direct labor spent 18 minutes on each product at a cost of $7.70 per hour. Overhead costs for January totaled $71,489 variable and $70,000 fixed. Answer the following questions about standard costs. What is the materials price variance? (Round per unit calculations to 2 decimal places, e.g. 1.25 and final answer to 0 decimal places, e.g. 125.) Materials price variance $ What is the materials quantity variance? (Round per unit calculations to 2 decimal places, e.g. 1.25 and final answer to 0 decimal places, e.g. 125.) Materials quantity variance $ What is the total materials variance? (Round per unit calculations to 2 decimal places, e.g. 1.25 and final answer to 0 decimal places, e.g. 125.) Total materials variance $ What is the labor quantity variance? (Round per unit calculations to 2 decimal places, e.g. 1.25 and final answer to 0 decimal places, e.g. 125.)

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter2: Building Blocks Of Managerial Accounting

Section: Chapter Questions

Problem 5EA: Rose Company has a relevant range of production between 10,000 and 25.000 units. The following cost...

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Waterways Corporation uses very stringent standard costs in evaluating its manufacturing efficiency. These standards are not “ideal” at this point, but the management is working toward that as a goal. At present, the company uses the following standards.

Materials
Item	Per unit	Cost
Metal		1 lb.	63¢ per lb.
Plastic		12 oz.	$1.00 per lb.
Rubber		4 oz.	88¢ per lb.
Direct labor
Item	Per unit	Cost
Labor		15 min.	$8.00 per hr.
Predetermined overhead rate based on direct labor hours = $4.68

The January figures for purchasing, production, and labor are:

The company purchased 231,800 pounds of raw materials in January at a cost of 78¢ a pound.

Production used 231,800 pounds of raw materials to make 117,000 units in January.

Direct labor spent 18 minutes on each product at a cost of $7.70 per hour.

Overhead costs for January totaled $71,489 variable and $70,000 fixed.

Answer the following questions about standard costs.

What is the materials price variance? (Round per unit calculations to 2 decimal places, e.g. 1.25 and final answer to 0 decimal places, e.g. 125.)

Materials price variance

What is the materials quantity variance? (Round per unit calculations to 2 decimal places, e.g. 1.25 and final answer to 0 decimal places, e.g. 125.)

Materials quantity variance

What is the total materials variance? (Round per unit calculations to 2 decimal places, e.g. 1.25 and final answer to 0 decimal places, e.g. 125.)

Total materials variance

What is the labor quantity variance? (Round per unit calculations to 2 decimal places, e.g. 1.25 and final answer to 0 decimal places, e.g. 125.)

Labor quantity variance

What is the total labor variance? (Round per unit calculations to 2 decimal places, e.g. 1.25 and final answer to 0 decimal places, e.g. 125.)

Total labor variance

What is the total overhead variance? (Round per unit calculations to 2 decimal places, e.g. 1.25 and final answer to 0 decimal places, e.g. 125.)

Total overhead variance

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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