Question

Koontz Company manufactures a number of products. The standards relating to one of these products
are shown below, along with actual cost data for May.

	Standard Cost per Unit				Actual Cost per Unit
Direct materials:
Standard: 1.80 feet at $2.20 per foot	$	3.96
Actual: 1.75 feet at $2.40 per foot					$	4.20
Direct labor:
Standard: 0.90 hours at $18.00 per hour		16.20
Actual: 0.95 hours at $17.40 per hour						16.53
Variable overhead:
Standard: 0.90 hours at $3.00 per hour		2.70
Actual: 0.95 hours at $2.60 per hour						2.47
Total cost per unit	$	22.86			$	23.20
Excess of actual cost over standard cost per unit			$	0.34

     The production superintendent was pleased when he saw this report and commented: “This $0.34 excess cost is well within the 2 percent limit management has set for acceptable variances. It's obvious that there's not much to worry about with this product."

     Actual production for the month was 12,000 units. Variable overhead cost is assigned to products on the basis of direct labor-hours. There were no beginning or ending inventories of materials.

Required:

1.	Compute the following variances for May:

a.

Materials price and quantity variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

Materials price variance
Materials quantity variance

b.

Labor rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

Labor rate variance
Labor efficiency variance

c.

Variable overhead rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

Variable overhead rate variance
Variable overhead efficiency variance

2.

How much of the $0.34 excess unit cost is traceable to each of the variances computed in (1) above. (Input all amounts as positive values.  Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your answers to 2 decimal places.)

Materials:
Price variance
Quantity variance
Labor:
Rate variance
Efficiency variance
Variable overhead:
Rate variance
Efficiency variance
Excess of actual over standard cost per unit

3.

How much of the $0.34 excess unit cost is traceable to apparent inefficient use of labor time? (Input all values as positive amounts. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round intermediate calculations. Round your final answers to 2 decimal places.)

Excess of actual over standard cost per unit
Less portion attributable to labor inefficiency:
Labor efficiency variance
Variable overhead efficiency variance
Portion due to other variances

Answer 1

1a.

Materials Price Variance	$ 4,200 U
Materials Quantity Variance	$ 1,320 F

1b.

Labor Rate Variance	$ 6,840 F
Labor Efficiency Variance	$ 10,800 U

1c.

Variable Overhead Rate Variance	$ 4,560 F
Variable Overhead Efficiency Variance	$ 1,800 U

2.

Materials
Price Variance	0.35 U
Quantity Variance	0.11 F	0.24 U
Labor
Rate Variance	0.57 F
Effficiency Variance	0.90 U	0.33 U
Variable Overhead
Rate Variance	0.38 F
Efficiency Variance	0.15 U	0.23 F
Excess of actual over standard cost per unit		0.34 U

3. $ 0.90 per unit of the excess unit cost of $ 0.34 is traceable to apparent inefficient use of labor time.