MANAGERIAL ACCT W/CONNECT >IC<
MANAGERIAL ACCT W/CONNECT >IC<
15th Edition
ISBN: 9781259405303
Author: Garrison
Publisher: MCG
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Chapter 10, Problem 14P

Requirement-1(a):

To determine

To calculate: Material Price and Quantity variances

Requirement-1(a):

Expert Solution
Check Mark

Answer to Problem 14P

Solution: Material Price and Quantity variances are as follows:

    Direct Material Price Variance $ 15,000.00 Favorable
    Direct Material Quantity Variance $ 2,500.00 Unfavorable

Explanation of Solution

Material Price and Quantity variances are calculated as follows:

    Direct Material Price Variance:
    Actual Price (A) = (225000/12000) $ 18.75 Per Ounce
    Standard Price (B) $ 20.00 Per Ounce
    Actual Quantity (C) 12000 Ounces
    Direct Material Price Variance = (A-B)*C = $ 15,000.00 Favorable
    Direct Material Quantity Variance:
    Actual Quantity (A) (12000-2500) 9500 Ounces
    Standard Quantity (B) (3750 units *2.5) 9375 Ounces
    Standard Price (C) $ 20.00 Per Ounce
    Direct Material Quantity Variance = (A-B)*C = $ 2,500.00 Unfavorable
Conclusion

Material Price and Quantity variances are as follows:

    Direct Material Price Variance $ 15,000.00 Favorable
    Direct Material Quantity Variance $ 2,500.00 Unfavorable

Requirement-1(b):

To determine

To state: The decision for purchase of more material from existing supplier

Requirement-1(b):

Expert Solution
Check Mark

Answer to Problem 14P

Solution: The Company should sign a long term contract with the existing supplier.

Explanation of Solution

The Company should sign a long term contract with the existing supplier because the rate of material is less than the standard rate and Direct Material Price Variance is favorable.

Conclusion

The Company should sign a long term contract with the existing supplier.

Requirement-2(a):

To determine

To calculate: Direct Labor Rate and Efficiency variances

Requirement-2(a):

Expert Solution
Check Mark

Answer to Problem 14P

Solution: Direct Labor Rate and Efficiency variances are as follows:

    Direct Labor Rate Variance $ 2,800.00 Favorable
    Direct Labor Efficiency Variance $ 7,875.00 Unfavorable

Explanation of Solution

Direct Labor Rate and Efficiency variances are calculated as follows:

    Direct Labor Rate Variance:
    Actual Rate (A) = (225000/12000) $ 22.00 Per hour
    Standard Rate (B) $ 22.50 Per hour
    Actual hours (C) (35 employees *160 hours) 5600 Hours
    Direct Labor Rate Variance = (A-B)*C = $ 2,800.00 Favorable
    Direct Labor Efficiency Variance:
    Actual hours (A) (35 employees *160 hours) 5600 Hours
    Standard Hours (B) (3750 units *1.4 hours) 5250 Hours
    Standard Rate (C) $ 22.50 Per hour
    Direct Labor Efficiency Variance =(A-B)*C = $ 7,875.00 Unfavorable
Conclusion

Direct Labor Rate and Efficiency variances are as follows:

    Direct Labor Rate Variance $ 2,800.00 Favorable
    Direct Labor Efficiency Variance $ 7,875.00 Unfavorable

Requirement-2(b):

To determine

To state: The decision to continue the labor mix

Requirement-2(b):

Expert Solution
Check Mark

Answer to Problem 14P

Solution: The Company should continue the labor mix.

Explanation of Solution

The Company should continue the labor mix because the Direct Labor Rate Variance is favorable which means the actual cost of the labor is less than the standards cost.

Conclusion

The Company should continue the labor mix.

Requirement-3:

To determine

To calculate: Variable overhead Rate and Efficiency variances and identify the relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance

Requirement-3:

Expert Solution
Check Mark

Answer to Problem 14P

Solution: Variable overhead Rate and Efficiency variances are as follows:

    Variable Overhead Rate Variance $ 1,400.00 Favorable
    Variable Overhead Efficiency Variance $ 1,225.00 Unfavorable

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance.

Explanation of Solution

Variable overhead Rate and Efficiency variances are calculated as follows:

    Variable Overhead Rate Variance:
    Actual Rate (A) = (18200/5600 hours) $ 3.25 Per hour
    Standard Rate (B) $ 3.50 Per hour
    Actual hours (C) (35 employees *160 hours) 5600 Hours
    Variable Overhead Rate Variance = (A-B)*C = $ 1,400.00 Favorable
    Variable Overhead Efficiency Variance:
    Actual hours (A) (35 employees *160 hours) 5600 Hours
    Standard Hours (B) (3750 units *1.4 hours) 5250 Hours
    Standard Rate (C) $ 3.50 Per hour
    Variable Overhead Efficiency Variance =(A-B)*C = $ 1,225.00 Unfavorable

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance. It means if the Direct Labor Efficiency Variance is unfavorable, then the Variable Overhead Efficiency Variance shall also be unfavorable.

Conclusion

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance.

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Chapter 10 Solutions

MANAGERIAL ACCT W/CONNECT >IC<

Ch. 10.A - PROBLEM 10A-11 Comprehensive Standard Cost...Ch. 10.A - Prob. 12PCh. 10.B - Prob. 1ECh. 10.B - Prob. 2ECh. 10.B - Prob. 3PCh. 10.B - Prob. 4PCh. 10.B - Prob. 5CCh. 10 - Prob. 1QCh. 10 - Why are separate price and quantity variances...Ch. 10 - 10-3 Who is generally responsible for the...Ch. 10 - The materials price variance can be computed at...Ch. 10 - 10-5 If the materials price variance is favorable...Ch. 10 - Prob. 6QCh. 10 - Prob. 7QCh. 10 - 10-8 What effect, if any, would you expect...Ch. 10 - 10-9 If variable manufacturing overhead is applied...Ch. 10 - 10-10 Why can undue emphasis on labor efficiency...Ch. 10 - The Excel worksheet form that appears below is to...Ch. 10 - Prob. 2AECh. 10 - Prob. 1F15Ch. 10 - Prob. 2F15Ch. 10 - Prob. 3F15Ch. 10 - Prob. 4F15Ch. 10 - Prob. 5F15Ch. 10 - Prob. 6F15Ch. 10 - Prob. 7F15Ch. 10 - Prob. 8F15Ch. 10 - Prob. 9F15Ch. 10 - Preble Company manufactures one product. Its...Ch. 10 - Prob. 11F15Ch. 10 - Prob. 12F15Ch. 10 - Prob. 13F15Ch. 10 - Prob. 14F15Ch. 10 - Prob. 15F15Ch. 10 - EXERCISE 10-1 Direct Materials Variances LO10-1...Ch. 10 - EXERCISE 10-2 Direct Labor Variances...Ch. 10 - EXERCISE 10–3 Variable Overhead Variances...Ch. 10 - EXERCISE 10-4 Direct Labor and Variable...Ch. 10 - EXERCISE 10-5 Working Backwards from Labor...Ch. 10 - EXERCISE 10-6 Direct Materials and Direct Labor...Ch. 10 - EXERCISE 10-7 Direct Materials Variances LOIO-1...Ch. 10 - EXERCISE 10-8 Direct Materials and Direct Labor...Ch. 10 - PROBLEM 10-9 Comprehensive Variance Analysis...Ch. 10 - PROBLEM 10-10 Multiple Products, Materials, and...Ch. 10 - PROBLEM 10-11 Direct Materials and Direct Labor...Ch. 10 - PROBLEM 10-12 Variance Analysis in a...Ch. 10 - Prob. 13PCh. 10 - Prob. 14PCh. 10 - PROBLEM 10-15 Comprehensive Variance Analysis...Ch. 10 - Prob. 16PCh. 10 - Prob. 17C
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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY