Horngren's Cost Accounting, Student Value Edition (16th Edition)
16th Edition
ISBN: 9780134476032
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 7, Problem 7.37P
Possible causes for price and efficiency variances. You have been invited to interview for an internship with an international food manufacturing company. When you arrive for the interview, you are given the following information related to a fictitious Belgian chocolatier for the month of June. The chocolatier manufactures truffles in 12-piece boxes. The production is labor intensive, and the delicate nature of the chocolate requires a high degree of skill.
| Actual | |
| Boxes produced | 10,000 |
| Direct materials used in production | 2,150,000 g |
| Actual direct material cost | 60,200 euro |
| Actual direct manufacturing labor-hours | 1,100 |
| Actual direct |
12,650 euro |
| Standards | |
| Purchase price of direct materials | 0.03 euro/g |
| Materials per box | 200 g |
| Wage rate | 12 euro/hour |
| Boxes per hour | 10 |
Please respond to the following questions as if you were in an interview situation:
- 1. Calculate the materials efficiency and price variance and the wage and labor efficiency variances for the month of June.
Required
- 2. Discuss some possible causes of the variances you have calculated. Can you make any possible connection between the material and labor variances? What recommendations do you have for future improvement?
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Q.Calculate the materials efficiency and price variance and the wage and labor efficiency variances for the month of June.
Albedo Incorporated manufactures high-end replacement telescope lenses for amateur and professional
astronomers who are seeking to upgrade the performance of their telescopes. You have just become employed as
a staff accountant at Albedo, and Jordan Coleman, the controller, has asked you to help with maintenance cost
estimation for the lens manufacturing process. You review the manufacturing process and decide that the best
cost driver for maintenance costs is machine hours. The data below are from the previous fiscal year for
maintenance costs and machine hours:
Month Maintenance Costs Machine Hours
$ 3,210
4,650
5,175
3,350
3,100
1
2
3
4
5
6
7
8
9
10
11
12
2,950
2,900
2,900
4,120
4,350
3,500
3,775
2,750
3,900
4,050
2,690
2,500
2,580
2,300
2,500
3,160
3,325
2,780
3,000
Required:
1. What is the cost equation for maintenance costs using the high-low method? (Round "slope (unit variable cost)"
to 2 decimal places. Negative amounts should be indicated by a minus sign.)
Barbara, the manager of Metlock, is analyzing the company's MOH costs from last year. Metlock had always followed an actual costing
system when determining the costs of its customizable telescopes. Barbara wondered if it would be better to switch to a normal
costing system, as she had heard a number of people talking about that at an industry conference she attended the previous month.
Since Metlock has a highly machine-intensive operation, machine hours are used as its MOH cost driver. Here are the costs and other
MOH information Barbara is analyzing:
Budgeted MOH cost
Actual MOH cost
Budgeted machine hours
Actual machine hours
$426,240
Actual MOH rate
$
419,040
Determine the actual MOH rate and the budgeted MOH rate Metlock would have used last year under actual costing and normal
costing, respectively. (Round answers to 2 decimal places, e.g. 52.75.)
Budgeted MOH rate $
96,000
108,000
/machine hour
/machine hour
Chapter 7 Solutions
Horngren's Cost Accounting, Student Value Edition (16th Edition)
Ch. 7 - What is the relationship between management by...Ch. 7 - What are two possible sources of information a...Ch. 7 - Distinguish between a favorable variance and an...Ch. 7 - What is the key difference between a static budget...Ch. 7 - Why might managers find a flexible-budget analysis...Ch. 7 - Describe the steps in developing a flexible...Ch. 7 - List four reasons for using standard costs.Ch. 7 - How might a manager gain insight into the causes...Ch. 7 - List three causes of a favorable direct materials...Ch. 7 - Describe three reasons for an unfavorable direct...
Ch. 7 - How does variance analysis help in continuous...Ch. 7 - Why might an analyst examining variances in the...Ch. 7 - Prob. 7.13QCh. 7 - When inputs are substitutable, how can the direct...Ch. 7 - Benchmarking against other companies enables a...Ch. 7 - Metal Shelf Companys standard cost for raw...Ch. 7 - All of the following statements regarding...Ch. 7 - Amalgamated Manipulation Manufacturings (AMM)...Ch. 7 - Atlantic Company has a manufacturing facility in...Ch. 7 - Basix Inc. calculates direct manufacturing labor...Ch. 7 - Flexible budget. Sweeney Enterprises manufactures...Ch. 7 - Flexible budget. Bryant Companys budgeted prices...Ch. 7 - Flexible-budget preparation and analysis. Bank...Ch. 7 - Flexible budget, working backward. The Clarkson...Ch. 7 - Flexible-budget and sales volume variances....Ch. 7 - Price and efficiency variances. Sunshine Foods...Ch. 7 - Materials and manufacturing labor variances....Ch. 7 - Direct materials and direct manufacturing labor...Ch. 7 - Price and efficiency variances, journal entries....Ch. 7 - Materials and manufacturing labor variances,...Ch. 7 - Journal entries and T-accounts (continuation of...Ch. 7 - Price and efficiency variances, benchmarking....Ch. 7 - Static and flexible budgets, service sector....Ch. 7 - Flexible budget, direct materials, and direct...Ch. 7 - Variance analysis, nonmanufacturing setting. Joyce...Ch. 7 - Comprehensive variance analysis review. Ellis...Ch. 7 - Possible causes for price and efficiency...Ch. 7 - Material-cost variances, use of variances for...Ch. 7 - Direct manufacturing labor and direct materials...Ch. 7 - Direct materials efficiency, mix, and yield...Ch. 7 - Direct materials and manufacturing labor...Ch. 7 - Direct materials and manufacturing labor...Ch. 7 - Use of materials and manufacturing labor variances...Ch. 7 - Direct manufacturing labor variances: price,...Ch. 7 - Direct-cost and selling price variances. MicroDisk...Ch. 7 - Variances in the service sector. Derek Wilson...Ch. 7 - Prob. 7.47P
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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