Waterways Corporation uses very stringent standard costs in evaluating its manufacturing efficiency. These standards are not “ideal” at this point, but the management is working toward that as a goal. At present, the company uses the following standards. Materials Item Per unit Cost Metal 1 lb. 63¢ per lb. Plastic 12 oz. $1.00 per lb. Rubber 4 oz. 88¢ per lb. Direct labor Item Per unit Cost Labor 15 min. $8.00 per hr. Predetermined overhead rate based on direct labor hours = $3.84 The January figures for purchasing, production, and labor are: The company purchased 230,000 pounds of raw materials in January at a cost of 79¢ a pound. Production used 230,000 pounds of raw materials to make 116,000 units in January. Direct labor spent 18 minutes on each product at a cost of $7.90 per hour. Overhead costs for January totaled $45,089 variable and $71,000 fixed. Answer the following questions about standard costs. (a) What is the materials price variance?
Waterways Corporation uses very stringent standard costs in evaluating its manufacturing efficiency. These standards are not “ideal” at this point, but the management is working toward that as a goal. At present, the company uses the following standards. Materials Item Per unit Cost Metal 1 lb. 63¢ per lb. Plastic 12 oz. $1.00 per lb. Rubber 4 oz. 88¢ per lb. Direct labor Item Per unit Cost Labor 15 min. $8.00 per hr. Predetermined overhead rate based on direct labor hours = $3.84 The January figures for purchasing, production, and labor are: The company purchased 230,000 pounds of raw materials in January at a cost of 79¢ a pound. Production used 230,000 pounds of raw materials to make 116,000 units in January. Direct labor spent 18 minutes on each product at a cost of $7.90 per hour. Overhead costs for January totaled $45,089 variable and $71,000 fixed. Answer the following questions about standard costs. (a) What is the materials price variance?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Waterways Corporation uses very stringent standard costs in evaluating its manufacturing efficiency. These standards are not “ideal” at this point, but the management is working toward that as a goal. At present, the company uses the following standards.
The January figures for purchasing, production, and labor are:
Answer the following questions about standard costs.
| Materials | ||||||
| Item | Per unit | Cost | ||||
| Metal | 1 lb. | 63¢ per lb. | ||||
| Plastic | 12 oz. | $1.00 per lb. | ||||
| Rubber | 4 oz. | 88¢ per lb. | ||||
| Direct labor | ||||||
| Item | Per unit | Cost | ||||
| Labor | 15 min. | $8.00 per hr. | ||||
| Predetermined |
The January figures for purchasing, production, and labor are:
| The company purchased 230,000 pounds of raw materials in January at a cost of 79¢ a pound. |
| Production used 230,000 pounds of raw materials to make 116,000 units in January. |
| Direct labor spent 18 minutes on each product at a cost of $7.90 per hour. |
| Overhead costs for January totaled $45,089 variable and $71,000 fixed. |
Answer the following questions about standard costs.
(a) What is the materials price variance?
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