Exercise 10-22 Straightforward Computation of Variances (LO 10-1, 10-3) Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller. Direct Labor: Quantity, 0.12 hour Rate, $6.00 per hour Direct Material: Quantity, 5 kilograms Price, $0.34 per kilogram Actual material purchases amounted to 81,200 kilograms at $0.375 per kilogram. Actual costs incurred in the production of 14,000 units were as follows: Direct labor: Direct material: $11,284 for 1,820 hours $27,300 for 72,800 kilograms Required: 1. Use the variance formulas to compute the direct-material price and quantity variances, the direct-material purchase price variance, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).) Direct-material price variance Direct-material quantity variance Direct-material purchase price variance Direct-labor rate variance Direct-labor efficiency variance $ $ $ $ $ 2,248 952 2,548 X 364 840 Unfavorable Unfavorable ✓ Unfavorable Unfavorable ✓ Unfavorable ✓
Exercise 10-22 Straightforward Computation of Variances (LO 10-1, 10-3) Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller. Direct Labor: Quantity, 0.12 hour Rate, $6.00 per hour Direct Material: Quantity, 5 kilograms Price, $0.34 per kilogram Actual material purchases amounted to 81,200 kilograms at $0.375 per kilogram. Actual costs incurred in the production of 14,000 units were as follows: Direct labor: Direct material: $11,284 for 1,820 hours $27,300 for 72,800 kilograms Required: 1. Use the variance formulas to compute the direct-material price and quantity variances, the direct-material purchase price variance, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).) Direct-material price variance Direct-material quantity variance Direct-material purchase price variance Direct-labor rate variance Direct-labor efficiency variance $ $ $ $ $ 2,248 952 2,548 X 364 840 Unfavorable Unfavorable ✓ Unfavorable Unfavorable ✓ Unfavorable ✓
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Exercise 10-22 Straightforward Computation of Variances (LO 10-1, 10-3)
Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following
standards have been set by the production-engineering staff and the controller.
Direct Labor:
Quantity, 0.12 hour
Rate, $6.00 per hour
Direct Material:
Quantity, 5 kilograms
Price, $0.34 per kilogram
Actual material purchases amounted to 81,200 kilograms at $0.375 per kilogram. Actual costs incurred in the production of 14,000
units were as follows:
Direct labor:
Direct material:
$11,284 for 1,820 hours
$27,300 for 72,800 kilograms
Required:
1. Use the variance formulas to compute the direct-material price and quantity variances, the direct-material purchase price variance,
and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable. (Indicate the effect of
each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)
Direct-material price variance
Direct-material quantity variance
Direct-material purchase price variance
Direct-labor rate variance
Direct-labor efficiency variance
$
$
$
$
$
2,248 X Unfavorable
952
2,548 X
Unfavorable
Unfavorable
364
Unfavorable
840
Unfavorable
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