503 - Practice - Mods 6 7 8_Updated_05_2023
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School
University of Illinois, Chicago *
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Course
211
Subject
Industrial Engineering
Date
Jan 9, 2024
Type
Pages
5
Uploaded by DeanMetal12114
Unit #3
Modules 6, 7, and 8
1
Question #
1
D
irect Materials and Direct Labor Va
riance
s
The following standard costs per unit have been established by
Heron
, Inc.:
Material (3 kilograms at $2 per kilogram)
$ 6.00
Direct labor (2 hours at $12 per hour)
24.00
During the month,
Heron
produced 1,100 units, which was 100 more units than planned.
They used 3,400 kilograms and 2,050 hours to do so.
Total actual materials spending was $6,460, while total actual labor spending was $27,675.
Required
Choose EITHER materials OR labor, and compute the following variances:
-
Spending
-
Efficiency
-
Activity
Be sure to denote each variance as favorable or unfavorable.
You only needed to pick materials OR labor.
So, one of the following is required.
There may be some rounding issues; no points
will
be taken off if there are rounding
differences.
Materials
Actual
Actual Input
@
St
d
Pr
ice
Flexible
Static
2.00
2.00
2.00
3.09091
3.00
3.00
1,100.00
1,100.00
1,000.00
6,460.00
6,800.00
6,600.00
6,000.00
340.00
(200.00)
(600.00)
Spending
Efficiency
Activity
Labor
Actual
Flexible
Static
12.00
12.00
12.00
1.86
2.00
2.00
1,100.00
1,100.00
1,000.00
27,675.00
24,600.00
26,400.00
24,000.00
(3,075.00)
1,800.00
(2,400.00)
Spending
Efficiency
Activity
Actual Input
@
St
d
Pr
ice
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Question #2.
Direct
Materials and
Direct
Labor Variances
Consider the following selected data regarding the manufacture of a line of upholstered chairs:
Standards Per Chair
Direct materials
2 square yards of input at $10 per square yard
Direct manufacturing labor
0.5 hour of input at $20 per hour
The following data were compiled regarding actual performance:
actual output units (chairs)
produced, 20,000; square yards of input purchased and used, 37,000; price per square yard,
$10.20; direct manufacturing labor costs, $176,400; actual hours of input, 9,000; labor price per
hour, $19.60.
Required:
1.
Show your computations of spending and efficiency variances for direct materials.
Give
a plausible explanation of why the variances occurred.
Materials spending variance:
$7,400 U
Materials efficiency variance:
$30,000 F
2.
Show your computations of
spending
and efficiency variances for direct
labor
.
Give a
plausible explanation of why the variances occurred.
Direct labor spending variance:
$3,600 F
Direct labor efficiency variance:
$20,000 F
Question #
3
.
Illawarra Office Equipment
The production report of Illawarra Office Equipment for April
201
9 included the following
information pertaining to the manufacture of a line of tables:
Direct
Direct
Manufacturing
Materials
Labor
Budgeted spending
$540,000
$360,000
Actual spending
672,000
396,000
Variance
$132,000
U
36,000
$
U
Actual price per unit of input (bd. ft., hr.)
$14
$18
Standard price per unit of input
$12
$20
Standard inputs allow per unit of output
5
2
Actual units of input
48,000
22,000
Budgeted units of output (product)
9,000
9,000
Actual units of output (product)
10,000
10,000
1.
How much of the Direct Material and Direct Labor Variances are due to (a) price changes,
(b) usage efficiencies or inefficiencies, (c) activity level changes.
Materials Price:
$96,000 U
Labor Price:
$44,000 F
Materials Efficiency:
$24,000 F
Labor Efficiency:
$40,000 U
Materials Activity:
$60,000 U
Labor Activity:
$40,000 U
2.
Give a plausible explanation for the performance.
As we discussed in class, there exist a number of plausible explanations for each of the above
variances.
9