Krueger Corporation in Washington, D.C., U.S., recently implemented a standard cost system. The company's cost accountant has gathered the following information needed to perform a variance analysis at the end of the month:+ Standard Cost Informatione Direct materials Quantity allowed per unit Direct labor rate Hours allowed per unit Fixed overhead budgeted. Normal level of production. Variable overhead application rate Fixed overhead application rate ($12,000 _ 1,200 units). Total overhead application rate. $5 per pounde 100 pounds per unit $20.00 per hour 2 hours per unite $12,000 per month 1,200 unitse $ 2.00 unit per 10.00 per unit $12.00 per unite Actual Cost Information Cost of materials purchased and used. Pounds of materials purchased and used Cost of direct labor Hours of direct labor. Cost of variable overhead Cost of fixed overhead $468,000 104,000 pounds- $46,480 2,240 hours+ $2,352 $12,850 1,000 units Volume of production. InstructionsH 1. Compute the direct materials price variance, given an actual price of $4.50 per pound ($468,000 104,000 pounds). (10%)e 2. Compute the materials quantity variance, given a standard quantity of 100,000 pounds allowed to produce 1,000 units (1,000 units x 100 pounds per unit). (10%)
Krueger Corporation in Washington, D.C., U.S., recently implemented a standard cost system. The company's cost accountant has gathered the following information needed to perform a variance analysis at the end of the month:+ Standard Cost Informatione Direct materials Quantity allowed per unit Direct labor rate Hours allowed per unit Fixed overhead budgeted. Normal level of production. Variable overhead application rate Fixed overhead application rate ($12,000 _ 1,200 units). Total overhead application rate. $5 per pounde 100 pounds per unit $20.00 per hour 2 hours per unite $12,000 per month 1,200 unitse $ 2.00 unit per 10.00 per unit $12.00 per unite Actual Cost Information Cost of materials purchased and used. Pounds of materials purchased and used Cost of direct labor Hours of direct labor. Cost of variable overhead Cost of fixed overhead $468,000 104,000 pounds- $46,480 2,240 hours+ $2,352 $12,850 1,000 units Volume of production. InstructionsH 1. Compute the direct materials price variance, given an actual price of $4.50 per pound ($468,000 104,000 pounds). (10%)e 2. Compute the materials quantity variance, given a standard quantity of 100,000 pounds allowed to produce 1,000 units (1,000 units x 100 pounds per unit). (10%)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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:Variable overhead application rate
Fixed overhead application rate ($12,000 1,200 units). . . 10.00 per unit
Total overhead application rate.
$ 2.00 per unit
. $12.00 per unite
Actual Cost Information+
Cost of materials purchased and used.
Pounds of materials purchased and used
Cost of direct labor.
Hours of direct labor.
Cost of variable overhead
Cost of fixed overhead...
Volume of production .
$468,000
..104,000 pounds+
$46,480+
2,240 hours+
$2,352+
$12,850
-1,000 units
Instructions+
1. Compute the direct materials price variance, given an actual price of $4.50 per
pound ($468,000 - 104,000 pounds). (10%)
2. Compute the materials quantity variance, given a standard quantity of 100,000
pounds allowed to produce 1,000 units (1,000 units x 100 pounds per unit).
(10%)
I
3. Compute the labor rate variance, given an actual labor rate of $20.75 per hour
($46,480 2,240 hours). (10%)+
Compute the labor efficiency variance. (10%)+
5. Compute the overhead spending variance. (10%)
6. Compute the overhead volume variance. (10%)
Transcribed Image Text:Krueger Corporation in Washington, D.C., U.S., recently implemented a standard
cost system. The company's cost accountant has gathered the following information
needed to perform a variance analysis at the end of the month:
Standard Cost Information+
Direct materials
Quantity allowed per unit
Direct labor rate..
Hours allowed per unit.
Fixed overhead budgeted
Normal level of production.
Variable overhead application rate
Fixed overhead application rate ($12,000 _ 1,200 units)... 10.00 per unit-
Total overhead application rate.
$5 per pound
100 pounds per unit
$20.00 per hour
..2 hours per unit-
$12,000 per month
1,200 units+
$2.00 per unit
$12.00 per unit
Actual Cost Information+
Cost of materials purchased and used.
Pounds of materials purchased and used
Cost of direct labor.
Hours of direct labor
Cost of variable overhead
Cost of fixed overhead.
Volume of production.
$468,000-
..104,000 pounds-
$46,480-
..2,240 hours-
$2,352-
$12,850-
1,000 units-
Instructions
Compute the direct materials price variance, given an actual price of $4.50 per
pound ($468,000 104,000 pounds). (10%)-
2. Compute the materials quantity variance, given a standard quantity of 100,000
pounds allowed to produce 1,000 units (1,000 units x 100 pounds per unit).
(10%)
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