MANAGERIAL ACCOUNTING W/CONNECT
16th Edition
ISBN: 9781260586916
Author: Garrison
Publisher: MCG CUSTOM
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Question
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
Conclusion
The Company should continue the labor mix.
Requirement-3:
To determine
To calculate: Variable
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.
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General Accounting question
Chapter 10 Solutions
MANAGERIAL ACCOUNTING W/CONNECT
Ch. 10.A - EXERCISE 10A-1 Fixed Overhead Variances LO10-4...Ch. 10.A - EXERCISE 10A-2 Predetermined Overhead Rate;...Ch. 10.A - Prob. 3ECh. 10.A - EXERCISE 10A-4 Fixed Overhead Variances LO10-4...Ch. 10.A - EXERCISE 10A5 Using Fixed Overhead Variances LO104...Ch. 10.A - EXERCISE 10A-6 Predetermined Overhead Rate LO10-4...Ch. 10.A - EXERCISE 10A-7 Relations Among Fixed Overhead...Ch. 10.A - Prob. 8PCh. 10.A - PROBLEM 10A-9 Applying Overhead; Overhead...Ch. 10.A - PROBLEM 10A-10 Comprehensive Standard Cost...
Ch. 10.A -
PROBLEM 10A-11 Comprehensive Standard Cost...Ch. 10.A - Prob. 12PCh. 10.B - EXERCISE 10B-1 Standard Cost Flows; Income...Ch. 10.B - Prob. 2ECh. 10.B - Prob. 3ECh. 10.B - Prob. 4ECh. 10.B - Prob. 5PCh. 10.B - Prob. 6PCh. 10 - Prob. 1QCh. 10 - Why are separate price and quantity variances...Ch. 10 - 10-3 Who is generally responsible for the...Ch. 10 - The materials price variance can be computed at...Ch. 10 - 10-5 If the materials price variance is favorable...Ch. 10 - Prob. 6QCh. 10 - Prob. 7QCh. 10 - 10-8 What effect, if any, would you expect...Ch. 10 - 10-9 If variable manufacturing overhead is applied...Ch. 10 - 10-10 Why can undue emphasis on labor efficiency...Ch. 10 -
The Excel worksheet form that appears below is to...Ch. 10 - Prob. 2AECh. 10 - Prob. 1F15Ch. 10 - Prob. 2F15Ch. 10 - Prob. 3F15Ch. 10 - Prob. 4F15Ch. 10 - Prob. 5F15Ch. 10 - Prob. 6F15Ch. 10 - Prob. 7F15Ch. 10 - Prob. 8F15Ch. 10 - Prob. 9F15Ch. 10 - Preble Company manufactures one product. Its...Ch. 10 - Prob. 11F15Ch. 10 - Prob. 12F15Ch. 10 - Prob. 13F15Ch. 10 - Prob. 14F15Ch. 10 - Prob. 15F15Ch. 10 - EXERCISE 10-1 Direct Materials Variances LO10-1...Ch. 10 -
EXERCISE 10-2 Direct Labor Variances...Ch. 10 -
EXERCISE 10–3 Variable Overhead Variances...Ch. 10 - EXERCISE 10-4 Direct Labor and Variable...Ch. 10 -
EXERCISE 10-5 Working Backwards from Labor...Ch. 10 - EXERCISE 10-6 Direct Materials and Direct Labor...Ch. 10 - EXERCISE 10-7 Direct Materials Variances LOIO-1...Ch. 10 -
EXERCISE 10-8 Direct Materials and Direct Labor...Ch. 10 -
PROBLEM 10-9 Comprehensive Variance Analysis...Ch. 10 -
PROBLEM 10-10 Multiple Products, Materials, and...Ch. 10 - PROBLEM 10-11 Direct Materials and Direct Labor...Ch. 10 - PROBLEM 10-12 Variance Analysis in a...Ch. 10 - Prob. 13PCh. 10 - Prob. 14PCh. 10 - PROBLEM 10-15 Comprehensive Variance Analysis...Ch. 10 - Prob. 16PCh. 10 - Prob. 17C
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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY