Material Price and Quantity variances

Question

Want to see more full solutions like this?

Answer 1

Question

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Chapter 10, Problem 14P

Requirement-1(a):

To determine

To calculate: Material Price and Quantity variances

Requirement-1(a):

Expert Solution

Answer to Problem 14P

Solution: Material Price and Quantity variances are as follows:

Direct Material Price Variance	$ 15,000.00	Favorable
Direct Material Quantity Variance	$ 2,500.00	Unfavorable

Explanation of Solution

Material Price and Quantity variances are calculated as follows:

Direct Material Price Variance:
Actual Price (A) = (225000/12000)	$ 18.75	Per Ounce
Standard Price (B)	$ 20.00	Per Ounce
Actual Quantity (C)	12000	Ounces
*Direct Material Price Variance = (A-B)C =**	$ 15,000.00	Favorable

Direct Material Quantity Variance:
Actual Quantity (A) (12000-2500)	9500	Ounces
Standard Quantity (B) (3750 units *2.5)	9375	Ounces
Standard Price (C)	$ 20.00	Per Ounce
*Direct Material Quantity Variance = (A-B)C =**	$ 2,500.00	Unfavorable

Conclusion

Material Price and Quantity variances are as follows:

Direct Material Price Variance	$ 15,000.00	Favorable
Direct Material Quantity Variance	$ 2,500.00	Unfavorable

Requirement-1(b):

To determine

To state: The decision for purchase of more material from existing supplier

Requirement-1(b):

Expert Solution

Answer to Problem 14P

Solution: The Company should sign a long term contract with the existing supplier.

Explanation of Solution

The Company should sign a long term contract with the existing supplier because the rate of material is less than the standard rate and Direct Material Price Variance is favorable.

Conclusion

The Company should sign a long term contract with the existing supplier.

Requirement-2(a):

To determine

To calculate: Direct Labor Rate and Efficiency variances

Requirement-2(a):

Expert Solution

Answer to Problem 14P

Solution: Direct Labor Rate and Efficiency variances are as follows:

Direct Labor Rate Variance	$ 2,800.00	Favorable
Direct Labor Efficiency Variance	$ 7,875.00	Unfavorable

Explanation of Solution

Direct Labor Rate and Efficiency variances are calculated as follows:

Direct Labor Rate Variance:
Actual Rate (A) = (225000/12000)	$ 22.00	Per hour
Standard Rate (B)	$ 22.50	Per hour
Actual hours (C) (35 employees *160 hours)	5600	Hours
*Direct Labor Rate Variance = (A-B)C =**	$ 2,800.00	Favorable

Direct Labor Efficiency Variance:
Actual hours (A) (35 employees *160 hours)	5600	Hours
Standard Hours (B) (3750 units *1.4 hours)	5250	Hours
Standard Rate (C)	$ 22.50	Per hour
*Direct Labor Efficiency Variance =(A-B)C =**	$ 7,875.00	Unfavorable

Conclusion

Direct Labor Rate and Efficiency variances are as follows:

Direct Labor Rate Variance	$ 2,800.00	Favorable
Direct Labor Efficiency Variance	$ 7,875.00	Unfavorable

Requirement-2(b):

To determine

To state: The decision to continue the labor mix

Requirement-2(b):

Expert Solution

Answer to Problem 14P

Solution: The Company should continue the labor mix.

Explanation of Solution

The Company should continue the labor mix because the Direct Labor Rate Variance is favorable which means the actual cost of the labor is less than the standards cost.

Conclusion

The Company should continue the labor mix.

Requirement-3:

To determine

To calculate: Variable overhead Rate and Efficiency variances and identify the relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance

Requirement-3:

Expert Solution

Answer to Problem 14P

Solution: Variable overhead Rate and Efficiency variances are as follows:

Variable Overhead Rate Variance	$ 1,400.00	Favorable
Variable Overhead Efficiency Variance	$ 1,225.00	Unfavorable

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance.

Explanation of Solution

Variable overhead Rate and Efficiency variances are calculated as follows:

Variable Overhead Rate Variance:
Actual Rate (A) = (18200/5600 hours)	$ 3.25	Per hour
Standard Rate (B)	$ 3.50	Per hour
Actual hours (C) (35 employees *160 hours)	5600	Hours
*Variable Overhead Rate Variance = (A-B)C =**	$ 1,400.00	Favorable

Variable Overhead Efficiency Variance:
Actual hours (A) (35 employees *160 hours)	5600	Hours
Standard Hours (B) (3750 units *1.4 hours)	5250	Hours
Standard Rate (C)	$ 3.50	Per hour
*Variable Overhead Efficiency Variance =(A-B)C =**	$ 1,225.00	Unfavorable

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance. It means if the Direct Labor Efficiency Variance is unfavorable, then the Variable Overhead Efficiency Variance shall also be unfavorable.

Conclusion

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

No AI part 3

Don't use chatgpt.

No ai

Answer 2

Question

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Chapter 10, Problem 14P

Requirement-1(a):

To determine

To calculate: Material Price and Quantity variances

Requirement-1(a):

Expert Solution

Answer to Problem 14P

Solution: Material Price and Quantity variances are as follows:

Direct Material Price Variance	$ 15,000.00	Favorable
Direct Material Quantity Variance	$ 2,500.00	Unfavorable

Explanation of Solution

Material Price and Quantity variances are calculated as follows:

Direct Material Price Variance:
Actual Price (A) = (225000/12000)	$ 18.75	Per Ounce
Standard Price (B)	$ 20.00	Per Ounce
Actual Quantity (C)	12000	Ounces
*Direct Material Price Variance = (A-B)C =**	$ 15,000.00	Favorable

Direct Material Quantity Variance:
Actual Quantity (A) (12000-2500)	9500	Ounces
Standard Quantity (B) (3750 units *2.5)	9375	Ounces
Standard Price (C)	$ 20.00	Per Ounce
*Direct Material Quantity Variance = (A-B)C =**	$ 2,500.00	Unfavorable

Conclusion

Material Price and Quantity variances are as follows:

Direct Material Price Variance	$ 15,000.00	Favorable
Direct Material Quantity Variance	$ 2,500.00	Unfavorable

Requirement-1(b):

To determine

To state: The decision for purchase of more material from existing supplier

Requirement-1(b):

Expert Solution

Answer to Problem 14P

Solution: The Company should sign a long term contract with the existing supplier.

Explanation of Solution

The Company should sign a long term contract with the existing supplier because the rate of material is less than the standard rate and Direct Material Price Variance is favorable.

Conclusion

The Company should sign a long term contract with the existing supplier.

Requirement-2(a):

To determine

To calculate: Direct Labor Rate and Efficiency variances

Requirement-2(a):

Expert Solution

Answer to Problem 14P

Solution: Direct Labor Rate and Efficiency variances are as follows:

Direct Labor Rate Variance	$ 2,800.00	Favorable
Direct Labor Efficiency Variance	$ 7,875.00	Unfavorable

Explanation of Solution

Direct Labor Rate and Efficiency variances are calculated as follows:

Direct Labor Rate Variance:
Actual Rate (A) = (225000/12000)	$ 22.00	Per hour
Standard Rate (B)	$ 22.50	Per hour
Actual hours (C) (35 employees *160 hours)	5600	Hours
*Direct Labor Rate Variance = (A-B)C =**	$ 2,800.00	Favorable

Direct Labor Efficiency Variance:
Actual hours (A) (35 employees *160 hours)	5600	Hours
Standard Hours (B) (3750 units *1.4 hours)	5250	Hours
Standard Rate (C)	$ 22.50	Per hour
*Direct Labor Efficiency Variance =(A-B)C =**	$ 7,875.00	Unfavorable

Conclusion

Direct Labor Rate and Efficiency variances are as follows:

Direct Labor Rate Variance	$ 2,800.00	Favorable
Direct Labor Efficiency Variance	$ 7,875.00	Unfavorable

Requirement-2(b):

To determine

To state: The decision to continue the labor mix

Requirement-2(b):

Expert Solution

Answer to Problem 14P

Solution: The Company should continue the labor mix.

Explanation of Solution

The Company should continue the labor mix because the Direct Labor Rate Variance is favorable which means the actual cost of the labor is less than the standards cost.

Conclusion

The Company should continue the labor mix.

Requirement-3:

To determine

To calculate: Variable overhead Rate and Efficiency variances and identify the relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance

Requirement-3:

Expert Solution

Answer to Problem 14P

Solution: Variable overhead Rate and Efficiency variances are as follows:

Variable Overhead Rate Variance	$ 1,400.00	Favorable
Variable Overhead Efficiency Variance	$ 1,225.00	Unfavorable

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance.

Explanation of Solution

Variable overhead Rate and Efficiency variances are calculated as follows:

Variable Overhead Rate Variance:
Actual Rate (A) = (18200/5600 hours)	$ 3.25	Per hour
Standard Rate (B)	$ 3.50	Per hour
Actual hours (C) (35 employees *160 hours)	5600	Hours
*Variable Overhead Rate Variance = (A-B)C =**	$ 1,400.00	Favorable

Variable Overhead Efficiency Variance:
Actual hours (A) (35 employees *160 hours)	5600	Hours
Standard Hours (B) (3750 units *1.4 hours)	5250	Hours
Standard Rate (C)	$ 3.50	Per hour
*Variable Overhead Efficiency Variance =(A-B)C =**	$ 1,225.00	Unfavorable

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance. It means if the Direct Labor Efficiency Variance is unfavorable, then the Variable Overhead Efficiency Variance shall also be unfavorable.

Conclusion

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Chapter 10, Problem 14P

Requirement-1(a):

To determine

To calculate: Material Price and Quantity variances

Requirement-1(a):

Expert Solution

Answer to Problem 14P

Solution: Material Price and Quantity variances are as follows:

Direct Material Price Variance	$ 15,000.00	Favorable
Direct Material Quantity Variance	$ 2,500.00	Unfavorable

Explanation of Solution

Material Price and Quantity variances are calculated as follows:

Direct Material Price Variance:
Actual Price (A) = (225000/12000)	$ 18.75	Per Ounce
Standard Price (B)	$ 20.00	Per Ounce
Actual Quantity (C)	12000	Ounces
*Direct Material Price Variance = (A-B)C =**	$ 15,000.00	Favorable

Direct Material Quantity Variance:
Actual Quantity (A) (12000-2500)	9500	Ounces
Standard Quantity (B) (3750 units *2.5)	9375	Ounces
Standard Price (C)	$ 20.00	Per Ounce
*Direct Material Quantity Variance = (A-B)C =**	$ 2,500.00	Unfavorable

Conclusion

Material Price and Quantity variances are as follows:

Direct Material Price Variance	$ 15,000.00	Favorable
Direct Material Quantity Variance	$ 2,500.00	Unfavorable

Requirement-1(b):

To determine

To state: The decision for purchase of more material from existing supplier

Requirement-1(b):

Expert Solution

Answer to Problem 14P

Solution: The Company should sign a long term contract with the existing supplier.

Explanation of Solution

The Company should sign a long term contract with the existing supplier because the rate of material is less than the standard rate and Direct Material Price Variance is favorable.

Conclusion

The Company should sign a long term contract with the existing supplier.

Requirement-2(a):

To determine

To calculate: Direct Labor Rate and Efficiency variances

Requirement-2(a):

Expert Solution

Answer to Problem 14P

Solution: Direct Labor Rate and Efficiency variances are as follows:

Direct Labor Rate Variance	$ 2,800.00	Favorable
Direct Labor Efficiency Variance	$ 7,875.00	Unfavorable

Explanation of Solution

Direct Labor Rate and Efficiency variances are calculated as follows:

Direct Labor Rate Variance:
Actual Rate (A) = (225000/12000)	$ 22.00	Per hour
Standard Rate (B)	$ 22.50	Per hour
Actual hours (C) (35 employees *160 hours)	5600	Hours
*Direct Labor Rate Variance = (A-B)C =**	$ 2,800.00	Favorable

Direct Labor Efficiency Variance:
Actual hours (A) (35 employees *160 hours)	5600	Hours
Standard Hours (B) (3750 units *1.4 hours)	5250	Hours
Standard Rate (C)	$ 22.50	Per hour
*Direct Labor Efficiency Variance =(A-B)C =**	$ 7,875.00	Unfavorable

Conclusion

Direct Labor Rate and Efficiency variances are as follows:

Direct Labor Rate Variance	$ 2,800.00	Favorable
Direct Labor Efficiency Variance	$ 7,875.00	Unfavorable

Requirement-2(b):

To determine

To state: The decision to continue the labor mix

Requirement-2(b):

Expert Solution

Answer to Problem 14P

Solution: The Company should continue the labor mix.

Explanation of Solution

The Company should continue the labor mix because the Direct Labor Rate Variance is favorable which means the actual cost of the labor is less than the standards cost.

Conclusion

The Company should continue the labor mix.

Requirement-3:

To determine

To calculate: Variable overhead Rate and Efficiency variances and identify the relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance

Requirement-3:

Expert Solution

Answer to Problem 14P

Solution: Variable overhead Rate and Efficiency variances are as follows:

Variable Overhead Rate Variance	$ 1,400.00	Favorable
Variable Overhead Efficiency Variance	$ 1,225.00	Unfavorable

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance.

Explanation of Solution

Variable overhead Rate and Efficiency variances are calculated as follows:

Variable Overhead Rate Variance:
Actual Rate (A) = (18200/5600 hours)	$ 3.25	Per hour
Standard Rate (B)	$ 3.50	Per hour
Actual hours (C) (35 employees *160 hours)	5600	Hours
*Variable Overhead Rate Variance = (A-B)C =**	$ 1,400.00	Favorable

Variable Overhead Efficiency Variance:
Actual hours (A) (35 employees *160 hours)	5600	Hours
Standard Hours (B) (3750 units *1.4 hours)	5250	Hours
Standard Rate (C)	$ 3.50	Per hour
*Variable Overhead Efficiency Variance =(A-B)C =**	$ 1,225.00	Unfavorable

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance. It means if the Direct Labor Efficiency Variance is unfavorable, then the Variable Overhead Efficiency Variance shall also be unfavorable.

Conclusion

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Chapter 10, Problem 14P

Requirement-1(a):

To determine

To calculate: Material Price and Quantity variances

Requirement-1(a):

Expert Solution

Answer to Problem 14P

Solution: Material Price and Quantity variances are as follows:

Direct Material Price Variance	$ 15,000.00	Favorable
Direct Material Quantity Variance	$ 2,500.00	Unfavorable

Explanation of Solution

Material Price and Quantity variances are calculated as follows:

Direct Material Price Variance:
Actual Price (A) = (225000/12000)	$ 18.75	Per Ounce
Standard Price (B)	$ 20.00	Per Ounce
Actual Quantity (C)	12000	Ounces
*Direct Material Price Variance = (A-B)C =**	$ 15,000.00	Favorable

Direct Material Quantity Variance:
Actual Quantity (A) (12000-2500)	9500	Ounces
Standard Quantity (B) (3750 units *2.5)	9375	Ounces
Standard Price (C)	$ 20.00	Per Ounce
*Direct Material Quantity Variance = (A-B)C =**	$ 2,500.00	Unfavorable

Conclusion

Material Price and Quantity variances are as follows:

Direct Material Price Variance	$ 15,000.00	Favorable
Direct Material Quantity Variance	$ 2,500.00	Unfavorable

Requirement-1(b):

To determine

To state: The decision for purchase of more material from existing supplier

Requirement-1(b):

Expert Solution

Answer to Problem 14P

Solution: The Company should sign a long term contract with the existing supplier.

Explanation of Solution

The Company should sign a long term contract with the existing supplier because the rate of material is less than the standard rate and Direct Material Price Variance is favorable.

Conclusion

The Company should sign a long term contract with the existing supplier.

Requirement-2(a):

To determine

To calculate: Direct Labor Rate and Efficiency variances

Requirement-2(a):

Expert Solution

Answer to Problem 14P

Solution: Direct Labor Rate and Efficiency variances are as follows:

Direct Labor Rate Variance	$ 2,800.00	Favorable
Direct Labor Efficiency Variance	$ 7,875.00	Unfavorable

Explanation of Solution

Direct Labor Rate and Efficiency variances are calculated as follows:

Direct Labor Rate Variance:
Actual Rate (A) = (225000/12000)	$ 22.00	Per hour
Standard Rate (B)	$ 22.50	Per hour
Actual hours (C) (35 employees *160 hours)	5600	Hours
*Direct Labor Rate Variance = (A-B)C =**	$ 2,800.00	Favorable

Direct Labor Efficiency Variance:
Actual hours (A) (35 employees *160 hours)	5600	Hours
Standard Hours (B) (3750 units *1.4 hours)	5250	Hours
Standard Rate (C)	$ 22.50	Per hour
*Direct Labor Efficiency Variance =(A-B)C =**	$ 7,875.00	Unfavorable

Conclusion

Direct Labor Rate and Efficiency variances are as follows:

Direct Labor Rate Variance	$ 2,800.00	Favorable
Direct Labor Efficiency Variance	$ 7,875.00	Unfavorable

Requirement-2(b):

To determine

To state: The decision to continue the labor mix

Requirement-2(b):

Expert Solution

Answer to Problem 14P

Solution: The Company should continue the labor mix.

Explanation of Solution

The Company should continue the labor mix because the Direct Labor Rate Variance is favorable which means the actual cost of the labor is less than the standards cost.

Conclusion

The Company should continue the labor mix.

Requirement-3:

To determine

To calculate: Variable overhead Rate and Efficiency variances and identify the relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance

Requirement-3:

Expert Solution

Answer to Problem 14P

Solution: Variable overhead Rate and Efficiency variances are as follows:

Variable Overhead Rate Variance	$ 1,400.00	Favorable
Variable Overhead Efficiency Variance	$ 1,225.00	Unfavorable

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance.

Explanation of Solution

Variable overhead Rate and Efficiency variances are calculated as follows:

Variable Overhead Rate Variance:
Actual Rate (A) = (18200/5600 hours)	$ 3.25	Per hour
Standard Rate (B)	$ 3.50	Per hour
Actual hours (C) (35 employees *160 hours)	5600	Hours
*Variable Overhead Rate Variance = (A-B)C =**	$ 1,400.00	Favorable

Variable Overhead Efficiency Variance:
Actual hours (A) (35 employees *160 hours)	5600	Hours
Standard Hours (B) (3750 units *1.4 hours)	5250	Hours
Standard Rate (C)	$ 3.50	Per hour
*Variable Overhead Efficiency Variance =(A-B)C =**	$ 1,225.00	Unfavorable

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance. It means if the Direct Labor Efficiency Variance is unfavorable, then the Variable Overhead Efficiency Variance shall also be unfavorable.

Conclusion

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 10, Problem 14P

Requirement-1(a):

To determine

To calculate: Material Price and Quantity variances

Requirement-1(a):

Expert Solution

Answer to Problem 14P

Solution: Material Price and Quantity variances are as follows:

Direct Material Price Variance	$ 15,000.00	Favorable
Direct Material Quantity Variance	$ 2,500.00	Unfavorable

Explanation of Solution

Material Price and Quantity variances are calculated as follows:

Direct Material Price Variance:
Actual Price (A) = (225000/12000)	$ 18.75	Per Ounce
Standard Price (B)	$ 20.00	Per Ounce
Actual Quantity (C)	12000	Ounces
*Direct Material Price Variance = (A-B)C =**	$ 15,000.00	Favorable

Direct Material Quantity Variance:
Actual Quantity (A) (12000-2500)	9500	Ounces
Standard Quantity (B) (3750 units *2.5)	9375	Ounces
Standard Price (C)	$ 20.00	Per Ounce
*Direct Material Quantity Variance = (A-B)C =**	$ 2,500.00	Unfavorable

Conclusion

Material Price and Quantity variances are as follows:

Direct Material Price Variance	$ 15,000.00	Favorable
Direct Material Quantity Variance	$ 2,500.00	Unfavorable

Requirement-1(b):

To determine

To state: The decision for purchase of more material from existing supplier

Requirement-1(b):

Expert Solution

Answer to Problem 14P

Solution: The Company should sign a long term contract with the existing supplier.

Explanation of Solution

The Company should sign a long term contract with the existing supplier because the rate of material is less than the standard rate and Direct Material Price Variance is favorable.

Conclusion

The Company should sign a long term contract with the existing supplier.

Requirement-2(a):

To determine

To calculate: Direct Labor Rate and Efficiency variances

Requirement-2(a):

Expert Solution

Answer to Problem 14P

Solution: Direct Labor Rate and Efficiency variances are as follows:

Direct Labor Rate Variance	$ 2,800.00	Favorable
Direct Labor Efficiency Variance	$ 7,875.00	Unfavorable

Explanation of Solution

Direct Labor Rate and Efficiency variances are calculated as follows:

Direct Labor Rate Variance:
Actual Rate (A) = (225000/12000)	$ 22.00	Per hour
Standard Rate (B)	$ 22.50	Per hour
Actual hours (C) (35 employees *160 hours)	5600	Hours
*Direct Labor Rate Variance = (A-B)C =**	$ 2,800.00	Favorable

Direct Labor Efficiency Variance:
Actual hours (A) (35 employees *160 hours)	5600	Hours
Standard Hours (B) (3750 units *1.4 hours)	5250	Hours
Standard Rate (C)	$ 22.50	Per hour
*Direct Labor Efficiency Variance =(A-B)C =**	$ 7,875.00	Unfavorable

Conclusion

Direct Labor Rate and Efficiency variances are as follows:

Direct Labor Rate Variance	$ 2,800.00	Favorable
Direct Labor Efficiency Variance	$ 7,875.00	Unfavorable

Requirement-2(b):

To determine

To state: The decision to continue the labor mix

Requirement-2(b):

Expert Solution

Answer to Problem 14P

Solution: The Company should continue the labor mix.

Explanation of Solution

The Company should continue the labor mix because the Direct Labor Rate Variance is favorable which means the actual cost of the labor is less than the standards cost.

Conclusion

The Company should continue the labor mix.

Requirement-3:

To determine

To calculate: Variable overhead Rate and Efficiency variances and identify the relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance

Requirement-3:

Expert Solution

Answer to Problem 14P

Solution: Variable overhead Rate and Efficiency variances are as follows:

Variable Overhead Rate Variance	$ 1,400.00	Favorable
Variable Overhead Efficiency Variance	$ 1,225.00	Unfavorable

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance.

Explanation of Solution

Variable overhead Rate and Efficiency variances are calculated as follows:

Variable Overhead Rate Variance:
Actual Rate (A) = (18200/5600 hours)	$ 3.25	Per hour
Standard Rate (B)	$ 3.50	Per hour
Actual hours (C) (35 employees *160 hours)	5600	Hours
*Variable Overhead Rate Variance = (A-B)C =**	$ 1,400.00	Favorable

Variable Overhead Efficiency Variance:
Actual hours (A) (35 employees *160 hours)	5600	Hours
Standard Hours (B) (3750 units *1.4 hours)	5250	Hours
Standard Rate (C)	$ 3.50	Per hour
*Variable Overhead Efficiency Variance =(A-B)C =**	$ 1,225.00	Unfavorable

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance. It means if the Direct Labor Efficiency Variance is unfavorable, then the Variable Overhead Efficiency Variance shall also be unfavorable.

Conclusion

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance.

Answer 6

Chapter 10, Problem 14P

Requirement-1(a):

To determine

To calculate: Material Price and Quantity variances

Requirement-1(a):

Expert Solution

Answer to Problem 14P

Solution: Material Price and Quantity variances are as follows:

Direct Material Price Variance	$ 15,000.00	Favorable
Direct Material Quantity Variance	$ 2,500.00	Unfavorable

Explanation of Solution

Material Price and Quantity variances are calculated as follows:

Direct Material Price Variance:
Actual Price (A) = (225000/12000)	$ 18.75	Per Ounce
Standard Price (B)	$ 20.00	Per Ounce
Actual Quantity (C)	12000	Ounces
*Direct Material Price Variance = (A-B)C =**	$ 15,000.00	Favorable

Direct Material Quantity Variance:
Actual Quantity (A) (12000-2500)	9500	Ounces
Standard Quantity (B) (3750 units *2.5)	9375	Ounces
Standard Price (C)	$ 20.00	Per Ounce
*Direct Material Quantity Variance = (A-B)C =**	$ 2,500.00	Unfavorable

Conclusion

Material Price and Quantity variances are as follows:

Direct Material Price Variance	$ 15,000.00	Favorable
Direct Material Quantity Variance	$ 2,500.00	Unfavorable

Answer 7

Chapter 10, Problem 14P

Requirement-1(a):

To determine

To calculate: Material Price and Quantity variances

Answer 8

Requirement-1(a):

Expert Solution

Answer to Problem 14P

Solution: Material Price and Quantity variances are as follows:

Direct Material Price Variance	$ 15,000.00	Favorable
Direct Material Quantity Variance	$ 2,500.00	Unfavorable

Answer 9

Requirement-1(a):

Expert Solution

Answer 10

Requirement-1(a):

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Material Price and Quantity variances are calculated as follows:

Direct Material Price Variance:
Actual Price (A) = (225000/12000)	$ 18.75	Per Ounce
Standard Price (B)	$ 20.00	Per Ounce
Actual Quantity (C)	12000	Ounces
*Direct Material Price Variance = (A-B)C =**	$ 15,000.00	Favorable

Direct Material Quantity Variance:
Actual Quantity (A) (12000-2500)	9500	Ounces
Standard Quantity (B) (3750 units *2.5)	9375	Ounces
Standard Price (C)	$ 20.00	Per Ounce
*Direct Material Quantity Variance = (A-B)C =**	$ 2,500.00	Unfavorable

Answer 13

Conclusion

Material Price and Quantity variances are as follows:

Direct Material Price Variance	$ 15,000.00	Favorable
Direct Material Quantity Variance	$ 2,500.00	Unfavorable

Answer 14

Requirement-1(b):

To determine

To state: The decision for purchase of more material from existing supplier

Requirement-1(b):

Expert Solution

Answer to Problem 14P

Solution: The Company should sign a long term contract with the existing supplier.

Explanation of Solution

The Company should sign a long term contract with the existing supplier because the rate of material is less than the standard rate and Direct Material Price Variance is favorable.

Conclusion

The Company should sign a long term contract with the existing supplier.

Answer 15

Requirement-1(b):

To determine

To state: The decision for purchase of more material from existing supplier

Answer 16

Requirement-1(b):

Expert Solution

Answer to Problem 14P

Solution: The Company should sign a long term contract with the existing supplier.

Answer 17

Requirement-1(b):

Expert Solution

Answer 18

Requirement-1(b):

Expert Solution

Answer 19

Expert Solution

Answer 20

Explanation of Solution

The Company should sign a long term contract with the existing supplier because the rate of material is less than the standard rate and Direct Material Price Variance is favorable.

Answer 21

Conclusion

The Company should sign a long term contract with the existing supplier.

Answer 22

Requirement-2(a):

To determine

To calculate: Direct Labor Rate and Efficiency variances

Requirement-2(a):

Expert Solution

Answer to Problem 14P

Solution: Direct Labor Rate and Efficiency variances are as follows:

Direct Labor Rate Variance	$ 2,800.00	Favorable
Direct Labor Efficiency Variance	$ 7,875.00	Unfavorable

Explanation of Solution

Direct Labor Rate and Efficiency variances are calculated as follows:

Direct Labor Rate Variance:
Actual Rate (A) = (225000/12000)	$ 22.00	Per hour
Standard Rate (B)	$ 22.50	Per hour
Actual hours (C) (35 employees *160 hours)	5600	Hours
*Direct Labor Rate Variance = (A-B)C =**	$ 2,800.00	Favorable

Direct Labor Efficiency Variance:
Actual hours (A) (35 employees *160 hours)	5600	Hours
Standard Hours (B) (3750 units *1.4 hours)	5250	Hours
Standard Rate (C)	$ 22.50	Per hour
*Direct Labor Efficiency Variance =(A-B)C =**	$ 7,875.00	Unfavorable

Conclusion

Direct Labor Rate and Efficiency variances are as follows:

Direct Labor Rate Variance	$ 2,800.00	Favorable
Direct Labor Efficiency Variance	$ 7,875.00	Unfavorable

Answer 23

Requirement-2(a):

To determine

To calculate: Direct Labor Rate and Efficiency variances

Answer 24

Requirement-2(a):

Expert Solution

Answer to Problem 14P

Solution: Direct Labor Rate and Efficiency variances are as follows:

Direct Labor Rate Variance	$ 2,800.00	Favorable
Direct Labor Efficiency Variance	$ 7,875.00	Unfavorable

Answer 25

Requirement-2(a):

Expert Solution

Answer 26

Requirement-2(a):

Expert Solution

Answer 27

Expert Solution

Answer 28

Explanation of Solution

Direct Labor Rate and Efficiency variances are calculated as follows:

Direct Labor Rate Variance:
Actual Rate (A) = (225000/12000)	$ 22.00	Per hour
Standard Rate (B)	$ 22.50	Per hour
Actual hours (C) (35 employees *160 hours)	5600	Hours
*Direct Labor Rate Variance = (A-B)C =**	$ 2,800.00	Favorable

Direct Labor Efficiency Variance:
Actual hours (A) (35 employees *160 hours)	5600	Hours
Standard Hours (B) (3750 units *1.4 hours)	5250	Hours
Standard Rate (C)	$ 22.50	Per hour
*Direct Labor Efficiency Variance =(A-B)C =**	$ 7,875.00	Unfavorable

Answer 29

Conclusion

Direct Labor Rate and Efficiency variances are as follows:

Direct Labor Rate Variance	$ 2,800.00	Favorable
Direct Labor Efficiency Variance	$ 7,875.00	Unfavorable

Answer 30

Requirement-2(b):

To determine

To state: The decision to continue the labor mix

Requirement-2(b):

Expert Solution

Answer to Problem 14P

Solution: The Company should continue the labor mix.

Explanation of Solution

The Company should continue the labor mix because the Direct Labor Rate Variance is favorable which means the actual cost of the labor is less than the standards cost.

Conclusion

The Company should continue the labor mix.

Answer 31

Requirement-2(b):

To determine

To state: The decision to continue the labor mix

Answer 32

Requirement-2(b):

Expert Solution

Answer to Problem 14P

Solution: The Company should continue the labor mix.

Answer 33

Requirement-2(b):

Expert Solution

Answer 34

Requirement-2(b):

Expert Solution

Answer 35

Expert Solution

Answer 36

Explanation of Solution

The Company should continue the labor mix because the Direct Labor Rate Variance is favorable which means the actual cost of the labor is less than the standards cost.

Answer 37

Conclusion

The Company should continue the labor mix.

Answer 38

Requirement-3:

To determine

To calculate: Variable overhead Rate and Efficiency variances and identify the relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance

Requirement-3:

Expert Solution

Answer to Problem 14P

Solution: Variable overhead Rate and Efficiency variances are as follows:

Variable Overhead Rate Variance	$ 1,400.00	Favorable
Variable Overhead Efficiency Variance	$ 1,225.00	Unfavorable

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance.

Explanation of Solution

Variable overhead Rate and Efficiency variances are calculated as follows:

Variable Overhead Rate Variance:
Actual Rate (A) = (18200/5600 hours)	$ 3.25	Per hour
Standard Rate (B)	$ 3.50	Per hour
Actual hours (C) (35 employees *160 hours)	5600	Hours
*Variable Overhead Rate Variance = (A-B)C =**	$ 1,400.00	Favorable

Variable Overhead Efficiency Variance:
Actual hours (A) (35 employees *160 hours)	5600	Hours
Standard Hours (B) (3750 units *1.4 hours)	5250	Hours
Standard Rate (C)	$ 3.50	Per hour
*Variable Overhead Efficiency Variance =(A-B)C =**	$ 1,225.00	Unfavorable

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance. It means if the Direct Labor Efficiency Variance is unfavorable, then the Variable Overhead Efficiency Variance shall also be unfavorable.

Conclusion

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance.

Answer 39

Requirement-3:

To determine

To calculate: Variable overhead Rate and Efficiency variances and identify the relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance

Answer 40

Requirement-3:

Expert Solution

Answer to Problem 14P

Solution: Variable overhead Rate and Efficiency variances are as follows:

Variable Overhead Rate Variance	$ 1,400.00	Favorable
Variable Overhead Efficiency Variance	$ 1,225.00	Unfavorable

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance.

Answer 41

Requirement-3:

Expert Solution

Answer 42

Requirement-3:

Expert Solution

Answer 43

Expert Solution

Answer 44

Explanation of Solution

Variable overhead Rate and Efficiency variances are calculated as follows:

Variable Overhead Rate Variance:
Actual Rate (A) = (18200/5600 hours)	$ 3.25	Per hour
Standard Rate (B)	$ 3.50	Per hour
Actual hours (C) (35 employees *160 hours)	5600	Hours
*Variable Overhead Rate Variance = (A-B)C =**	$ 1,400.00	Favorable

Variable Overhead Efficiency Variance:
Actual hours (A) (35 employees *160 hours)	5600	Hours
Standard Hours (B) (3750 units *1.4 hours)	5250	Hours
Standard Rate (C)	$ 3.50	Per hour
*Variable Overhead Efficiency Variance =(A-B)C =**	$ 1,225.00	Unfavorable

There is a direct positive relation between the Direct Labor Efficiency Variance and Variable overhead Efficiency Variance. It means if the Direct Labor Efficiency Variance is unfavorable, then the Variable Overhead Efficiency Variance shall also be unfavorable.