Concept introduction:
Variances are generally the deviations of actual reports with the budget made for the business. This is determined by comparing the actual one with the budgeted goals so as to know the deviation and then the managers can take the actions which are better for eliminating the variances.
To find out:
The missing figures of the variances.
Answer to Problem 1E
Direct material price variance
Direct material quantity variance
Direct material spending variance
Direct labor rate variance
Direct labor efficiency variance
Direct labor spending variance
Explanation of Solution
Material Variances:
As per given the data:
Particular | Standard | Actual |
Standard amount per can produced | ||
Actual number of pans produced | ||
Standard quantity | ||
Price |
Calculation of material price variance:
It is the difference between actual and standard price of product, and formula is
It is favorable variance. So, it is indicating that the company has paid lower price from the standard price.
Calculation of material quantity variance:
It is the nominal value difference between actual and standard quantity, and formula is
It is also favorable variance. So, it is indicating that the company has used less quantity of raw material than the standard quantity.
Calculation of direct material spending variance:
It is the total of material price variance and material quantity variance, and formula is
Labor variances:
As per given the data:
Particular | Standard | Actual |
Standard hours per can produced | ||
Actual number of pans produced | ||
Total hours | ||
Rate |
Calculation of direct labor rate variance:
It is the comparison between standard hour late and actual hour rate with constant actual hours, and formula is:
It is favorable. So, it is indicating that the actual hourly rate is lower from standard hourly rate.
Calculation of direct labor efficiency variance:
It is the comparison between the actual labor hours and standard labor hours with the standard hour rate, and formula is:
It is unfavorable that means employees used more hours to produce pens.
Calculation of direct labor spending variance:
It is the total of labor rate variance and labor efficiency variance, and formula is
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Chapter 9 Solutions
MANAGERIAL ACCOUNTING W/CONNECT
- Sommers Company uses the following rule to determine whether materials usage variances should be investigated: A materials usage variance will be investigated anytime the amount exceeds the lesser of 12,000 or 10% of the standard cost. Reports for the past 5 weeks provided the following information: Required: 1. Using the rule provided, identify the cases that will be investigated. 2. CONCEPTUAL CONNECTION Suppose investigation reveals that the cause of an unfavorable materials usage variance is the use of lower-quality materials than are normally used. Who is responsible? What corrective action would likely be taken? 3. CONCEPTUAL CONNECTION Suppose investigation reveals that the cause of a significant unfavorable materials usage variance is attributable to a new approach to manufacturing that takes less labor time but causes more material waste. Examination of the labor efficiency variance reveals that it is favorable and larger than the unfavorable materials usage variance. Who is responsible? What action should be taken?arrow_forwardRefer to the information for Cinturon Corporation on the previous page. Required: 1. Break down the total variance for labor into a rate variance and an efficiency variance using the columnar and formula approaches. 2. CONCEPTUAL CONNECTION As part of the investigation of the unfavorable variances, the plant manager interviews the production manager. The production manager complains strongly about the quality of the leather strips. He indicates that the strips are of lower quality than usual and that workers have to be more careful to avoid a belt with cracks and more time is required. Also, even with extra care, many belts have to be discarded and new ones produced to replace the rejects. This replacement work has also produced some overtime demands. What corrective action should the plant manager take?arrow_forwardMaterials and labor variances Branca Inspections Inc. specializes in determining whether a building or houses drainpipes are properly tied into the citys sewer system. The company pours colored chemical through the pipes and collects an inspection sample from each outlet, which is then analyzed. Each job should take 15 hours for each of four inspectors, at a standard rate of 18 per hour. Each job requires a standard quantity of 5 gallons of Glow (a colored chemical), which should cost 25 per gallon. Data from the companys most recent job (a building) follow: Required: Compute the following variances, using the formulas on pages 421422 and 424: 1. Materials price and quantity variances. 2. Labor rate and efficiency variances.arrow_forward
- Refer to the information for Cinturon Corporation on the previous page. Required: 1. Break down the total variance for materials into a price variance and a usage variance using the columnar and formula approaches. 2. CONCEPTUAL CONNECTION Suppose the Boise plant manager investigates the materials variances and is told by the purchasing manager that a cheaper source of leather strips had been discovered and that this is the reason for the favorable materials price variance. Quite pleased, the purchasing manager suggests that the materials price standard be updated to reflect this new, less expensive source of leather strips. Should the plant manager update the materials price standard as suggested? Why or why not?arrow_forwardComputing materials variances D-List Calendar Co. specializes in manufacturing calendars that depict obscure comedians. The company uses a standard cost system to control its costs. During one month of operations, the direct materials costs and the quantities of paper used showed the following: Calculate the following: 1. Total cost of purchases for the month 2. Materials purchase price variance 3. Materials quantity variance 4. Net materials variancearrow_forwardWoodpecker manufactures sawmill equipment. They use a standard Costing system and recognize material price variance at the time of material purchases. They use carbide to make the teeth on their band-saw blades. They received an order for 250 band-saw blades, but they did not have any carbide in stock. They purchased 3,500 pounds of carbide for $14,875 but should have spent $16,275. Each saw blade has a standard carbide direct materials quantity of 7.8 pounds. A. If they used 8 pounds per blade, what would be the direct materials quantity variance? B. If they used 7.5 pounds per blade, what would be the direct materials quantity variance? C. Compute the direct materials price variance based on 7.5 pounds of carbide per blade actually used.arrow_forward
- 10-52 Materials and Labor Variances Refer to the information for Deporte Company above. Required: Compute the materials and labor variances associated with the changeover activity, labeling each variance as favorable or unfavorable. Use the following information for Exercises 10-52 and 10-53: Deporte Company produces single-colored T-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established: During the year, 79,500 pounds of material were purchased and used for the changeover activity. There were 30,000 batches produced, with the following actual prime costs:arrow_forwardMadison Company uses the following rule to determine whether direct labor efficiency variances ought to be investigated. A direct labor efficiency variance will be investigated anytime the amount exceeds the lesser of 12,000 or 10 percent of the standard labor cost. Reports for the past five weeks provided the following information: Required: 1. Using the rule provided, identify the cases that will be investigated. 2. Suppose that investigation reveals that the cause of an unfavorable direct labor efficiency variance is the use of lower quality direct materials than are usually used. Who is responsible? What corrective action would likely be taken? 3. Suppose that investigation reveals that the cause of a significant favorable direct labor efficiency variance is attributable to a new approach to manufacturing that takes less labor time but causes more direct materials waste. Upon examining the direct materials usage variance, it is discovered to be unfavorable, and it is larger than the favorable direct labor efficiency variance. Who is responsible? What action should be taken? How would your answer change if the unfavorable variance were smaller than the favorable?arrow_forwardThe worksheet you have developed will handle most simple variance analysis problems. Try the problem below for Pscheidl, Inc.: Actual production for October was 11,500 units. Compute the direct materials and direct labor variances for Pscheidl, Inc. Be careful when entering your input because this problem presents the information in a different format from the McGrade Industries data. Save the file as PRIMEVAR4. Print the worksheet when done.arrow_forward
- Which of the following is the most likely explanation for an unfavorable materials usage variance and a favorable labor wage variance? a. The new labor contract increased wages. b. Higher quality materials were purchased, resulting in less waste. c. The company experience labor turnover and newer, less experienced workers were hired. d. A new supplier offered a lower price for materials.arrow_forwardH.J. Heinz Company uses standards to control its materials costs. Assume that a batch of ketchup (7,650 pounds) has the following standards: The actual materials in a batch may vary from the standard due to tomato characteristics. Assume that the actual quantities of materials for batch 08-99 were as follows: a.Determine the standard unit materials cost per pound for a standard batch. b.Determine the direct materials quantity variance for batch 08-99.arrow_forwardRefer to the data in Problem 9.34. Vet-Pro, Inc., also uses two different types of direct labor in producing the anti-anxiety mixture: mixing and drum-filling labor (the completed product is placed into 50-gallon drums). For each batch of 20,000 gallons of direct materials input, the following standards have been developed for direct labor: The actual direct labor hours used for the output produced in March are also provided: Required: 1. Compute the direct labor mix and yield variances. (Round standard price of yield to four significant digits.) 2. Compute the total direct labor efficiency variance. Show that the total direct labor efficiency variance is equal to the sum of the direct labor mix and yield variances. Vet-Pro, Inc., produces a veterinary grade anti-anxiety mixture for pets with behavioral problems. Two chemical solutions, Aranol and Lendyl, are mixed and heated to produce a chemical that is sold to companies that produce the anti-anxiety pills. The mixture is produced in batches and has the following standards: During March, the following actual production information was provided: Required: 1. Compute the direct materials mix and yield variances. 2. Compute the total direct materials usage variance for Aranol and Lendyl. Show that the total direct materials usage variance is equal to the sum of the direct materials mix and yield variances.arrow_forward
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