**Pro Fender Variance Analysis Exercise****Scenario Description:**Pro Fender, a company with a standard cost system, produced 20,000 boat fenders during 2018. They used 142,000 square feet of extruded vinyl at $1.35 per square foot. The labor required was 410 direct labor hours at $15.50 per hour. The direct materials standard is seven square feet per fender at a standard cost of $1.40 per square foot. The labor standard is 0.023 direct labor hours per fender at a standard cost of $14.50 per hour.**Instructions:**1. **Cost Variance Calculation:** - **Direct Materials Cost Variance:** - Formula: \[ (AQ \times AC) - (SQ \times SC) \] - Variance: Calculation result and classification as Favorable (F) or Unfavorable (U). - **Direct Labor Cost Variance:** - Formula: \[ (AQ \times AC) - (SQ \times SC) \] - Variance: Calculation result and classification as Favorable (F) or Unfavorable (U).2. **Efficiency Variance Calculation:** - **Direct Materials Efficiency Variance:** - Formula: \[ (AQ - SQ) \times SC \] - Variance: Calculation result and classification as Favorable (F) or Unfavorable (U). - **Direct Labor Efficiency Variance:** - Formula: \[ (AQ - SQ) \times SC \] - Variance: Calculation result and classification as Favorable (F) or Unfavorable (U).3. **Trade-off Analysis:** - Consider if the variances reflect trade-offs by managers: - Analyze the relationship between the direct materials cost variance and the direct materials efficiency variance. - Analyze the relationship between the direct labor cost variance and the direct labor efficiency variance.**Fill in the Answers:**- The direct materials cost variance combined with the direct materials efficiency variance suggests managers may have used (fill-in) direct materials. The effect on the total direct materials variance is (fill-in).- The direct labor cost variance combined with the direct labor efficiency variance suggests managers may have used (fill-in) workers who performed more efficiently. The effect on the total direct labor variance is (fill-in).**Note:**- AC = Actual The image shows a dropdown menu under the label "Formula." The menu contains a list of mathematical expressions and terms related to cost or variance analysis, often used in managerial accounting. The items are:1. $(AC - SC) \times AQ$2. $(AC - SC) \times SQ$3. $(AQ - SQ) \times AC$4. $(AQ - SQ) \times SC$5. Actual FOH - Allocated FOH6. Actual FOH - Budgeted FOH7. Budgeted FOH - Allocated FOHThese expressions may refer to calculations involving:- AC: Actual Cost- SC: Standard Cost- AQ: Actual Quantity- SQ: Standard Quantity- FOH: Fixed OverheadSuch formulas are commonly used to analyze variances between actual and expected performance in cost accounting and budgeting.

Direct material cost varianceDMCV=AC-SC×AQ=$1.35-$1.40×142,000=-$7,100Favorable Direct labor cost…

Pro Fender, which uses a standard cost system, manufactured 20,000 boat fenders during 2018, using 142,000 square feet of extruded vinyl purchased at $1.35 per square foot. Production required 410 direct labor hours that cost $15.50 per hour. The direct materials standard was seven square feet of vinyl per fender, at a standard cost of $1.40 per square foot. The labor standard was 0.023 direct labor hour per fender, at a standard cost of $14.50 per hour. Read the requirement. Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity, FOH = fixed overhead; SC = standard cost; SQ = standard quantity.) Formula Variance Direct materials cost variance = Direct labor cost variance Select the required formulas, compute the efficiency variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity: FOH = fixed overhead; SC = standard cost; SQ = standard quantity.) Formula Variance Direct materials efficiency variance = Direct labor efficiency variance Does the pattern of variances suggest Pro Fender's managers have been making trade-offs? Explain. The v direct materials cost variance combined with the V direct materials efficiency variance suggests that managers may have used V direct materials. The net effect on the total direct materials variance is The V direct labor cost variance combined with the V direct labor efficiency variance suggests that managers may have used V workers who performed more efficiently. The net effect on the total direct labor variance is

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q