1.
Determine the direct labor rate and efficiency variance for assembly departments.
1.
Explanation of Solution
Compute the labor rate variance for the prior year is as follows:
Compute the efficiency variance for the prior year:
Compute the labor rate variance for the current year:
Compute the efficiency variance for the current year:
Working notes:
Determine the actual and standard labor rate for both the periods:
| Particulars | Prior year | (W.N) | Current year | (W.N) |
| Total actual direct labor hours | $500,000 | $25 × 20,000 | $400,000 | $20 × 20,000 |
| Total standard direct labor hours | $480,000 | $24 × 20,000 | $420,000 | $21 × 20,000 |
| Direct labor rate | $15,000,000 | $30 × 500,000 | $14,400,000 | $36 × 400,000 |
| $14,000,000 | $28 × 500,000 | $14,000,000 | $35 × 400,000 | |
| Standard rate | $13,440,000 | $28 × 480,000 | $14,700,000 | $35 × 420,000 |
Determine the direct labor rate and efficiency variance for testing departments
Compute the labor rate variance for the prior year:
Compute the efficiency variance for the prior year:
Compute the labor rate variance for the current year:
Compute the efficiency variance for the current year:
Working notes:
Determine the actual and standard labor rate of testing department for both the periods:
| Particulars | Prior year | (W.N) | Current year | (W.N) |
| Total actual direct labor hours | $240,000 | $12 × 20,000 | $200,000 | $10 × 20,000 |
| Total standard direct labor hours | $280,000 | $14 × 20,000 | $220,000 | $11 × 20,000 |
| Direct labor rate | $4,800,000 | $20 × 240,000 | $4,800,000 | $24 × 200,000 |
| $5,040,000 | $21 × 240,000 | $5,000,000 | $25 × 200,000 | |
| Standard rate | $5,880,000 | $21× 280,000 | $5,500,000 | $25 × 220,000 |
2.
Determine the partial operational productivity for prior year and current year for assembly department.
2.
Explanation of Solution
Compute the partial operational productivity for prior year:
Compute the partial operational productivity for current year:
Compute the partial operational productivity of for testing department for prior year:
Compute the partial operational productivity of testing department for current year:
3.
Determine the partial financial productivity for prior year and current year for assembly department.
3.
Explanation of Solution
Compute the partial financial productivity for prior year:
Compute the partial financial productivity for current year:
Compute the partial financial productivity of testing department for prior year:
Compute the partial operational productivity of testing department for current year:
4.
Compare and comment results based on two requirements:
4.
Explanation of Solution
| Operational partial productivity | |||
| Particulars | Prior Year | Current year | Changes |
| Assembly | 0.04 | 0.05 | 0.01 F |
| Testing | 0.0833 | 0.1 | 0.0167 F |
| Financial partial productivity | |||
| Particulars | Prior Year | Current year | Changes |
| Assembly | 0.0013 | 0.0014 | 0.0001 F |
| Testing | 0.0042 | 0.0042 | 0 |
The operational partial productivity for both the departments is increased in the current year compared to previous year. The financial partial productivity is also increased compared to testing department.
5.
Explain how the productivity measure differ from variance analyze.
5.
Explanation of Solution
The
Under productivity measures, the productivity of the previous year is determined without adjusting changes occurred during the current year.
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Chapter 16 Solutions
COST MANAGMENT WITH CONNECT ACCESS
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