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# Direct Materials and Direct Labor Variance Analysis Abbeville Fixture Company manufactures units in a small manufacturing...

Direct Materials and Direct Labor Variance Analysis

Abbeville Fixture Company manufactures units in a small manufacturing facility. The units are made from brass. Manufacturing has 50 employees. Each employee presently provides 32 hours of labor per week. Information about a production week is as follows:

 Standard wage per hour \$13.8 Standard labor time per unit 20 min. Standard number of lbs. of brass 1.7 lbs. Standard price per lb. of brass \$11 Actual price per lb. of brass \$11.25 Actual lbs. of brass used during the week 14,708 lbs. Number of units produced during the week 8,400 Actual wage per hour \$14.21 Actual hours for the week (50 employees × 32 hours) 1,600 hrs.

Required:

a. Determine the standard cost per unit for direct materials and direct labor. Round the cost per unit to two decimal places.

 Direct materials standard cost per unit \$ Direct labor standard cost per unit \$ Total standard cost per unit \$

b. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Round your answers to the nearest whole dollar. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

 Direct Materials Price Variance \$ Unfavorable Direct Materials Quantity Variance \$ Unfavorable Total Direct Materials Cost Variance \$ Unfavorable

c. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Round your answers to the nearest whole dollar. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

 Direct Labor Rate Variance \$ Unfavorable Direct Labor Time Variance \$ Favorable Total Direct Labor Cost Variance \$ Favorable

Chapter 22 Homework (Application)

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Flexible Budgeting and Variance Analysis

I Love My Chocolate Company makes dark chocolate and light chocolate. Both products require cocoa and sugar. The following planning information has been made available:

 Standard Amount per Case Dark Chocolate Light Chocolate Standard Price per Pound Cocoa 10 lbs. 7 lbs. \$4.60 Sugar 8 lbs. 12 lbs. 0.60 Standard labor time 0.4 hr. 0.5 hr.
 Dark Chocolate Light Chocolate Planned production 4,000 cases 9,800 cases Standard labor rate \$16.50 per hr. \$16.50 per hr.

I Love My Chocolate Company does not expect there to be any beginning or ending inventories of cocoa or sugar. At the end of the budget year, I Love My Chocolate Company had the following actual results:

 Dark Chocolate Light Chocolate Actual production (cases) 3,800 10,200 Actual Price per Pound Actual Pounds Purchased and Used Cocoa \$4.70 109,900 Sugar 0.55 149,000 Actual Labor Rate Actual Labor Hours Used Dark chocolate \$16.00 per hr. 1,380 Light chocolate 17.00 per hr. 5,230

Required:

1. Prepare the following variance analyses for both chocolates and the total, based on the actual results and production levels at the end of the budget year:

a. Direct materials price variance, direct materials quantity variance, and total variance.

b. Direct labor rate variance, direct labor time variance, and total variance.

Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. If there is no variance, enter a zero.

 a. Direct materials price variance \$ Unfavorable Direct materials quantity variance \$ Unfavorable Total direct materials cost variance \$ Unfavorable b. Direct labor rate variance \$ Unfavorable Direct labor time variance \$ Favorable Total direct labor cost variance \$ Unfavorable

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The data related to Shunda Enterprises Inc.’s factory overhead cost for the production of 20,000 units of product are as follows:

 Actual: Variable factory overhead \$68,300 Fixed factory overhead 49,700 Standard: 30,000 hrs. at \$4 (\$2.30 for variable factory overhead) 120,000

Productive capacity at 100% of normal was 28,900 hours, and the factory overhead cost budgeted at the level of 30,000 standard hours was \$119,300. Based on these data, the chief cost accountant prepared the following variance analysis:

 Variable factory overhead controllable variance: Actual variable factory overhead cost incurred \$68,300 Budgeted variable factory overhead for 30,000 hours 69,000 Variance—favorable \$(700) Fixed factory overhead volume variance: Normal productive capacity at 100% 28,900 hrs. Standard for amount produced 30,000 Productive capacity not used 1,100 hrs. Standard variable factory overhead rate x \$4 Variance—unfavorable 4,400 Total factory overhead cost variance—unfavorable \$3,700

Compute the following to assist you in identifying the errors in the factory overhead cost variance analysis. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your interim computations to the nearest cent, if required.

 Variance Amount Favorable/Unfavorable Variable Factory Overhead Controllable Variance \$ Favorable Fixed Factory Overhead Volume Variance \$ Favorable Total Factory Overhead Cost Variance \$

As per policy, only one question is allowed to answer at a time, so answering Q1 :

Q1)

 Standard cost per unit: Direct Material standard cost per unit 1.7*11 =18.7 Direct Labor standard cost per unit (20/60)*13.8 =4.6 Total Standard cost per unit =\$23.30 DMPV = (Actual cost - Standard cost)Actual usage = (11.25-11)*14708 =3677 U DMQV = (Std usage of actual units - actual usage)Std price = (8400*1.7-14708)*11 =4708 U TDMCV= DMPV+DMQV =8385 U DLRV = (Actual rate - Standard rate)Actual usage = (14.21-13.8)*1600 =656 U DLEV = (Std Hours of actual units - actual hours)Std rate = (8400*20/60-1600)*13.80 =16560 U TDLCV= DLRV+DLEV= =17216 U