Question

Koontz Company manufactures a number of products. The standards relating to one of these products are...

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   
  







  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.

3.

How much of the $0.08 excess unit cost is traceable to apparent inefficient use of labor time? (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). 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

Homework Answers

Answer #1
  • All working forms part of the answer
  • Actual Data and Standard data for actual output of 12000 units

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

  • Calculation of All the variances

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

  • Answer, based ob above working

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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