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 $3.00 per foot | $ | 5.40 | ||||
Actual: 1.80 feet at $3.30 per foot | $ | 5.94 | ||||
Direct labor: | ||||||
Standard: 0.90 hours at $18.00 per hour | 16.20 | |||||
Actual: 0.92 hours at $17.50 per hour | 16.10 | |||||
Variable overhead: | ||||||
Standard: 0.90 hours at $5.00 per hour | 4.50 | |||||
Actual: 0.92 hours at $4.50 per hour | 4.14 | |||||
|
|
|
|
|||
Total cost per unit | $ | 26.10 | $ | 26.18 | ||
|
|
|
|
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Excess of actual cost over standard cost per unit | $ | 0.08 | ||||
|
The production superintendent was pleased when he saw this report and commented: “This $0.08 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. |
|
Actual DATA for |
12000 |
units |
|
Quantity (AQ) |
Rate (AR) |
Actual Cost |
|
Direct Material |
21600 |
$ 3.30 |
$ 71,280.00 |
Direct labor |
11040 |
$ 17.50 |
$ 1,93,200.00 |
Variable Overhead |
11040 |
$ 4.50 |
$ 49,680.00 |
Standard DATA for |
12000 |
units |
|
Quantity (SQ) |
Rate (SR) |
Standard Cost |
|
Direct Material |
21600 |
$ 3.00 |
$ 64,800.00 |
Direct labor |
10800 |
$ 18.00 |
$ 1,94,400.00 |
Variable Overhead |
10800 |
$ 5.00 |
$ 54,000.00 |
Material Price Variance |
||||||
( |
Standard Rate |
- |
Actual Rate |
) |
x |
Actual Quantity |
( |
$ 3.00 |
- |
$ 3.30 |
) |
x |
21600 |
-6480 |
||||||
Variance |
6480 |
Unfavourable-U |
||||
Material Quantity Variance |
||||||
( |
Standard Quantity |
- |
Actual Quantity |
) |
x |
Standard Rate |
( |
21600 |
- |
21600 |
) |
x |
$ 3.00 |
0 |
||||||
Variance |
0 |
Favourable-F |
||||
Material Spending Variance |
||||||
( |
Standard Cost |
- |
Actual Cost |
) |
||
( |
$ 64,800.00 |
- |
$ 71,280.00 |
) |
||
-6480 |
||||||
Variance |
6480 |
Unfavourable-U |
||||
Labor Rate Variance |
||||||
( |
Standard Rate |
- |
Actual Rate |
) |
x |
Actual Labor Hours |
( |
$ 18.00 |
- |
$ 17.50 |
) |
x |
11040 |
5520 |
||||||
Variance |
5520 |
Favourable-F |
||||
Labour Efficiency Variance |
||||||
( |
Standard Hours |
- |
Actual Hours |
) |
x |
Standard Rate |
( |
10800 |
- |
11040 |
) |
x |
$ 18.00 |
-4320 |
||||||
Variance |
4320 |
Unfavourable-U |
||||
Labor Spending Variance |
||||||
( |
Standard Cost |
- |
Actual Cost |
) |
||
( |
$ 1,94,400.00 |
- |
$ 1,93,200.00 |
) |
||
1200 |
||||||
Variance |
1200 |
Favourable-F |
||||
Variable Overhead Rate Variance |
||||||
( |
Standard Rate |
- |
Actual Rate |
) |
x |
Actual Labor Hours |
( |
$ 5.00 |
- |
$ 4.50 |
) |
x |
11040 |
5520 |
||||||
Variance |
5520 |
Favourable-F |
||||
Variable Overhead Efficiency Variance |
||||||
( |
Standard Hours |
- |
Actual Hours |
) |
x |
Standard Rate |
( |
10800 |
- |
11040 |
) |
x |
$ 5.00 |
-1200 |
||||||
Variance |
1200 |
Unfavourable-U |
||||
Variable Overhead Spending Variance |
||||||
( |
Standard Cost |
- |
Actual Cost |
) |
||
( |
$ 54,000.00 |
- |
$ 49,680.00 |
) |
||
4320 |
||||||
Variance |
4320 |
Favourable-F |
Excess of actual over standard cost per unit |
0.08 |
U |
||
Less portion attributable to labor inefficiency: |
||||
Labor efficiency variance |
[4320U/12000 units] |
0.36 U |
||
Variable overhead efficiency variance |
[1200U/12000 units] |
0.1 U |
0.46 |
U |
Portion due to other variances |
0.38 |
F |
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