Assume that Schmidt Machinery Company had the standard costs reflected in Exhibit 14.5. In a given month, the company used 3,530 pounds of aluminum to manufacture 936 units. The company paid $29.00 per pound during the month to purchase aluminum. At the beginning of the month, the company had 66 pounds of aluminum on hand. At the end of the month, the company had only 46 pounds of aluminum in its warehouse. Schmidt used 5,350 direct labor hours during the month, at an average cost of $42.00 per hour. Required: Compute the following variances for the month: 1. The purchase price variance for aluminum. Indicate whether this variance is favorable or unfavorable. 2. The usage variance for aluminum. Indicate whether this variance is favorable or unfavorable. 3. The direct labor rate variance. Indicate whether this variance is favorable or unfavorable. 4. The direct labor efficiency variance. Indicate whether this variance is favorable or unfavorable. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) Answer is complete but not entirely correct. 1. Purchase-price variance $ 14,040 234 2. Usage variance $ Unfavorable 5,650 Favorable 3. Direct labor rate variance $ 10,700 Unfavorable Efficiency variance $ 26,800 Unfavorable
Assume that Schmidt Machinery Company had the standard costs reflected in Exhibit 14.5. In a given month, the company used 3,530 pounds of aluminum to manufacture 936 units. The company paid $29.00 per pound during the month to purchase aluminum. At the beginning of the month, the company had 66 pounds of aluminum on hand. At the end of the month, the company had only 46 pounds of aluminum in its warehouse. Schmidt used 5,350 direct labor hours during the month, at an average cost of $42.00 per hour. Required: Compute the following variances for the month: 1. The purchase price variance for aluminum. Indicate whether this variance is favorable or unfavorable. 2. The usage variance for aluminum. Indicate whether this variance is favorable or unfavorable. 3. The direct labor rate variance. Indicate whether this variance is favorable or unfavorable. 4. The direct labor efficiency variance. Indicate whether this variance is favorable or unfavorable. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) Answer is complete but not entirely correct. 1. Purchase-price variance $ 14,040 234 2. Usage variance $ Unfavorable 5,650 Favorable 3. Direct labor rate variance $ 10,700 Unfavorable Efficiency variance $ 26,800 Unfavorable
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Assume that Schmidt Machinery Company had the standard costs reflected in Exhibit 14.5. In a given month, the company used 3,530
pounds of aluminum to manufacture 936 units. The company paid $29.00 per pound during the month to purchase aluminum. At the
beginning of the month, the company had 66 pounds of aluminum on hand. At the end of the month, the company had only 46 pounds
of aluminum in its warehouse. Schmidt used 5,350 direct labor hours during the month, at an average cost of $42.00 per hour.
Required:
Compute the following variances for the month:
1. The purchase price variance for aluminum. Indicate whether this variance is favorable or unfavorable.
2. The usage variance for aluminum. Indicate whether this variance is favorable or unfavorable.
3. The direct labor rate variance. Indicate whether this variance is favorable or unfavorable.
4. The direct labor efficiency variance. Indicate whether this variance is favorable or unfavorable.
(Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)
Answer is complete but not entirely correct.
1.
Purchase-price variance
$
14,040
234
2.
Usage variance
$
Unfavorable
5,650 Favorable
3.
Direct labor rate variance
$
10,700
Unfavorable
Efficiency variance
$
26,800
Unfavorable
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