A.
The following materials standards have been established for a particular product:
The following data pertain to operations concerning the product for the last month:
Required:
a. What is the materials price variance for the month?
b. What is the materials quantity variance for the month?
a. Materials price variance = (AQ x AP) - (AQ x SP)
= $139,400 - (8,500 x $15.60) = $6,800 U
b. SQ = Standard quantity per unit x Actual output
= 5.2 x 1,640 = 8,528
Materials quantity variance = SP(AQ - SQ)
= $15.60(8,200 - 8,528) = $5,117 F
B. The following standards have been established for a raw material used to make product N04:
The following data pertain to a recent month's operations:
Required:
a. What is the materials price variance for the month?
b. What is the materials quantity variance for the month?
a. Materials price variance = (AQ x AP) - (AQ x SP)
= $82,680 - (5,200 x $15.50) = $2,080 U
b. Materials quantity variance = SP(AQ - SQ*)
= $15.50(4,600 - 4,752) = $2,356 F
*SQ = Standard quantity per unit x Actual output = 2.7 x 1,760 = 4,752
C. The standards for product J35 call for 1.0 pounds of a raw material that costs $15.60 per
pound. Last month, 5,700 pounds of the raw material were purchased for $90,345. The actual
output of the month was 5,280 units of product J35. A total of 5,200 pounds of the raw material
were used to produce this output.
Required:
a. What is the materials price variance for the month?
b. What is the materials quantity variance for the month?
a. Materials price variance = (AQ x AP) - (AQ x SP)
= $90,345 - (5,700 x $15.60) = $1,425 U
b. Materials quantity variance = SP(AQ - SQ*)
= $15.60(5,200 - 5,280) = $1,248 F
*SQ = Standard quantity per unit x Actual output
= 1.0 x 5,280 = 5,280
D. The following direct labor standards have been established for product W88V:
The following data pertain to last month's operations:
Required:
a. What was the labor rate variance for the month?
b. What was the labor efficiency variance for the month?
a. Labor rate variance = (AH x AR) - (AH x SR)
= $76,995 - (5,900 x $12.10) = $5,605 U
b. Labor efficiency variance = SR(AH - SH*)
= $12.10 (5,900 - 5,920) = $242 F
*SH = Standard hours per unit x Actual output = 4.0 x 1,480 = 5,920
E. The standards for product M74M specify 2.5 direct labor-hours per unit at $13.20 per direct
labor-hour. Last month 3,160 units of product M74M were produced using 8,100 direct labor-
hours at a total direct labor wage cost of $104,085.
Required:
a. What was the labor rate variance for the month?
b. What was the labor efficiency variance for the month?
a. Labor rate variance = (AH x AR) - (AH x SR)
= $104,085 - (8,100 x $13.20) = $2,835 F
b. Labor efficiency variance = SR(AH - SH*)
= $13.20 (8,100 - 7,900) = $2,640 U
*SH = Standard hours per unit x Actual output = 2.5 x 3,160 = 7,900
F. Sifford Corporation, which makes landing gears, has provided the following data for a recent
month:
Required:
Determine the rate and efficiency variances for the variable overhead item supplies and indicate
whether those variables are favorable or unfavorable. Show your work!
Standard machine-hours allowed for the actual output = 9.4 x 8,500 = 79,900
Variable overhead rate variance = (AH x AR) - (AH x SR)
= $210,524 - (79,030 x $2.40) = $210,524 - $189,672 = $20,852 U
Variable overhead efficiency variance = (AH x SR) - (SH x SR)
= (79,030 x $2.40) - (79,900 x $2.40) = $189,672 - $191,760 = $2,088 F
G. Huger Corporation makes automotive engines. For the most recent month, budgeted
production was 6,900 engines. The budgeted power cost is $5.10 per machine-hour. The
company's standards indicate that each engine requires 7.5 machine-hours. Actual production
was 7,000 engines. Actual machine-hours were 53,240 machine-hours. Actual power cost totaled
$247,598.
Required:
Determine the rate and efficiency variances for the variable overhead item power cost and
indicate whether those variances are unfavorable or favorable. Show your work!
Rate Variance= 23,926 F Efficiency Variance= 3,774 U
Standard machine-hours allowed for the actual output = 7.5 x 7,000 = 52,500
Variable overhead rate variance = (AH x AR) - (AH x SR)
= $247,598 - (53,240 x $5.10) = $247,598 - $271,524 = $23,926 F
Variable overhead efficiency variance = (AH x SR) - (SH x SR)
= (53,240 x $5.10) - (52,500 x $5.10) = $271,524 - $267,750 = $3,774 U
H. Karrenberg Corporation keeps careful track of the time required to fill orders. The times
required for a particular order appear below:
Required:
a. Determine the throughput time. Show your work!
b. Determine the manufacturing cycle efficiency (MCE), Show your work!
c. Determine the delivery cycle time. Show your work!
= 0.6 hours + 0.3 hours + 2.1 hours + 8.4 hours
= 11.4 hours
b. MCE = Value-added time/Throughput time = 0.6 hours/11.4 hours = 0.05
c. Delivery cycle time = Wait time + Throughput time
= 14.0 hours + 11.4 hours = 25.4 hours
I. Sucharzewski Corporation's management keeps track of the time it takes to process orders.
During the most recent month, the following average times were recorded per order:
Required:
a. Compute the throughput time. 7.1 days
b. Compute the manufacturing cycle efficiency (MCE). 1.1 / 7.1= 15.49%
c. What percentage of the production time is spent in non-value-added activities?
d. Compute the delivery cycle time. 14.9 days
a. Throughput time = Process time + Inspection time + Move time + Queue time
= 1.1 days + 0.4 days + 0.8 days + 4.8 days = 7.1 days
b. MCE = Value-added time (Process time) Throughput time
= 1.1 days 7.1 days = 0.15
c. Percentage of time spent on non-value-added activities = 100% - MCE%
= 100% - 15% = 85%
d. Delivery cycle time = Wait time + Throughput time = 7.8 days + 7.1 days
= 14.9 days
J. Shiplett Corporation applies overhead to products based on machine-hours. The denominator
level of activity is 8,800 machine-hours. The budgeted fixed manufacturing overhead costs are
$317,680. In March, the actual fixed manufacturing overhead costs were $314,300 and the
standard machine-hours allowed for the actual output were 8,500 machine-hours.
Required:
a. Compute the budget variance for March. Show your work! 3,380F
b. Compute the volume variance for March. Show your work! 317,680 – 306,850= 10,830U
a. Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing
overhead cost = $314,300 - $317,680 = $3,380 F
b. Fixed portion of the predetermined overhead rate = $317,680/8,800 machine-hours = $36.10
per machine-hour
Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours -
Standard hours allowed) = $36.10 x (8,800 - 8,500) = $10,830 U
K. Modine Corporation has provided the following data for September.
Required:
a. Compute the budget variance for September. Show your work! 41,740 – 42,400= 660F
b. Compute the volume variance for September. Show your work! 42,400 – 53,000 = 10,600F
a. Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing
overhead cost = $41,740 - $42,400 = $660 F
b. Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours -
Standard hours allowed) = $26.50 x (1,600 - 2,000) = $10,600 F
