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# 9/14/2014

Score: 60

1.

## out of 60 points (100%)

award:

10 out of
10.00
points
Barberry, Inc., manufactures a product called Fruta. The company uses a standard cost system and has
established the following standards for one unit of Fruta:

Direct materials
Direct labor

Standard
Quantity
1.5 pounds
0.7 hours
0.7 hours

Standard Price
or Rate
\$ 5.60 per pound
\$11.90 per hour
\$ 2.80 per hour

Standard
Cost
\$ 8.40
8.33
1.96
\$ 18.69

During June, the company recorded this activity related to production of Fruta:
a. The company produced 4,100 units during June.
b. A total of 9,380 pounds of material were purchased at a cost of \$49,714.
c. There was no beginning inventory of materials; however, at the end of the month, 2,000 pounds of
material remained in ending inventory.
d. The company employs 10 persons to work on the production of Fruta. During June, they worked an
average of 237 hours at an average rate of \$12.60 per hour.
e. Variable manufacturing overhead is assigned to Fruta on the basis of direct labor-hours. Variable
manufacturing overhead costs during June totaled \$6,162.
The company's management is anxious to determine the efficiency of Fruta production activities.
Required:
1. For direct materials:
a. Compute the price and quantity variances. (Input all amounts as positive values. Do not round
intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required.
Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and
Materials price variance
Materials quantity variance

\$ 2,814
\$ 6,888

F
U

b. The materials were purchased from a new supplier who is anxious to enter into a long term
purchase contract. Would you recommend that the company sign the contract?
No
2. For labor employed in the production of Fruta:
a. Compute the rate and efficiency variances. (Input all amounts as positive values. Leave no
cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance
by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero

## Labor rate variance

Labor efficiency variance

\$ 1,659
\$ 5,950

U
F

b. In the past, the 10 persons employed in the production of Fruta consisted of 4 senior workers and
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## Assignment Print View

6 assistants. During June, the company experimented with 5 senior workers and 5 assistants.
Would you recommend that the new labor mix be continued?
Yes
3a. Compute the variable overhead rate and efficiency variances. (Input all amounts as positive
values. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0"
wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for
unfavorable, and "None" for no effect (i.e., zero variance). Omit the "\$" sign in your
response.)

\$ 474
\$ 1,400

F
F

Worksheet

## Learning Objective: 10-02 Compute the

direct labor efficiency and rate variances
and explain their significance.

## Learning Objective: 10-01 Compute the

direct materials quantity and price
variances and explain their significance.

## Learning Objective: 10-03 Compute the

efficiency and rate variances and explain
their significance.

Barberry, Inc., manufactures a product called Fruta. The company uses a standard cost system and has
established the following standards for one unit of Fruta:

Direct materials
Direct labor

Standard
Quantity
1.5 pounds
0.7 hours
0.7 hours

Standard Price
or Rate
\$ 5.60 per pound
\$11.90 per hour
\$ 2.80 per hour

Standard
Cost
\$ 8.40
8.33
1.96
\$ 18.69

During June, the company recorded this activity related to production of Fruta:
a. The company produced 4,100 units during June.
b. A total of 9,380 pounds of material were purchased at a cost of \$49,714.
c. There was no beginning inventory of materials; however, at the end of the month, 2,000 pounds of
material remained in ending inventory.
d. The company employs 10 persons to work on the production of Fruta. During June, they worked an
average of 237 hours at an average rate of \$12.60 per hour.
e. Variable manufacturing overhead is assigned to Fruta on the basis of direct labor-hours. Variable
manufacturing overhead costs during June totaled \$6,162.
The company's management is anxious to determine the efficiency of Fruta production activities.
Required:
1. For direct materials:
a. Compute the price and quantity variances. (Input all amounts as positive values. Do not round
intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required.
Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and
Materials price variance
Materials quantity variance

\$
\$

2,814
6,888

F
U

b. The materials were purchased from a new supplier who is anxious to enter into a long term
purchase contract. Would you recommend that the company sign the contract?
No
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## 2. For labor employed in the production of Fruta:

a. Compute the rate and efficiency variances. (Input all amounts as positive values. Leave no
cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance
by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero
Labor rate variance
Labor efficiency variance

\$
\$

1,659
5,950

U
F

b. In the past, the 10 persons employed in the production of Fruta consisted of 4 senior workers and
6 assistants. During June, the company experimented with 5 senior workers and 5 assistants.
Would you recommend that the new labor mix be continued?
Yes
3a. Compute the variable overhead rate and efficiency variances. (Input all amounts as positive
values. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0"
wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for
unfavorable, and "None" for no effect (i.e., zero variance). Omit the "\$" sign in your
response.)

\$
\$

474
1,400

F
F

Explanation:
1.
a.

In the solution below, the materials price variance is computed on the entire amount of materials
purchased, whereas the materials quantity variance is computed only on the amount of materials used in
production:
Standard Quantity Allowed
for Actual Output,
at Standard Price
(SQ SP)

Actual Quantity of
Input, at
Standard Price
(AQ SP)

Actual Quantity
of Input,
at Actual Price
(AQ AP)

6,150 pounds*
\$5.60 per pound
= \$34,440

7,380 pounds
\$5.60 per pound
= \$41,328

\$49,714

Materials quantity
variance = \$6,888 U
9,380 pounds
\$5.60 per pound
= \$52,528
Materials price variance
= \$2,814 F
*4,100 units 1.5 pounds per unit = 6,150 pounds
1.
b.

No, the contract should probably not be signed. Although the new supplier is offering the material at only
\$5.30* per pound, the large materials quantity variance indicates a problem using these materials in
production. The company still has 2,000 pounds of unused material in the warehouse; if these materials
do as poorly in production as the 7,380 pounds already used, the total quantity variance on the 9,380
pounds of materials purchased will be very large.
*\$49,714 9,380 pounds = \$5.30 per pound
2.
a.
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## Standard Hours Allowed

for Actual Output,
at Standard Rate
(SH SR)

Actual Hours
of Input,
at Standard Rate
(AH SR)

Actual Hours
of Input,
at Actual Rate
(AH AR)

2,870 hours*
\$11.90 per hour
= \$34,153

2,370 hours**
\$11.90 per hour
= \$28,203

2,370 hours**
\$12.60 per hour
= \$29,862

= \$5,950 F

= \$1,659 U

## Spending variance = \$4,291 F

*4,100 units .70 hours per unit = 2,870 hours
**10 workers 237.00 hours per worker = 2,370 hours
2.
b.

Yes, the new labor mix should probably be continued. Although it increases the average hourly labor cost
from \$11.90 to \$12.60, resulting in an \$1,659 unfavorable labor rate variance, this is more than offset by
greater efficiency of labor time. Notice that the labor efficiency variance is \$5,950 favorable. Thus, the
new labor mix reduces overall labor costs.
3a.

## Standard Hours Allowed

for Actual Output,
at Standard Rate
(SH SR)

Actual Hours
of Input,
at Standard Rate
(AH SR)

Actual Hours
of Input,
at Actual Rate
(AH AR)

2,870 hours
\$2.80 per hour
= \$8,036

2,370 hours
\$2.80 per hour
= \$6,636

\$6,162

efficiency variance
= \$1,400 F

rate variance
= \$474 F

2.

award:

10 out of
10.00
points

## Full credit for this question has been awarded to all

students

3.

award:

10 out of
10.00
points
Vitalite, Inc., produces a number of products, including a body-wrap kit. Standard variable costs relating
to a single kit are given below:

Direct materials
Direct labor

Standard Quantity
or Hours
?
?

http://ezto.mheducation.com/hm_accounting.tpx?todo=printview

Standard Price
or Rate
\$4 per yard
?

Standard
Cost
\$?
?
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\$2 per direct
labor-hour

## Total standard cost per kit

?
\$47

During August, 400 kits were manufactured and sold. Selected information relating to the months
production is given below:

## Total standard cost*

Actual costs incurred
Materials price variance
Materials quantity variance
Labor rate variance
Labor efficiency variance

Materials Used
?
\$8,000
?
\$ 4,400 U

Direct Labor
\$5,400
?

Variable
Manufacturing
\$1,800
\$1,820

?
?
?
?

## *For the month's production.

The following additional information is available for Augusts production of kits:

## Actual direct labor-hours

Difference between standard and actual cost per kit produced during August

1,000
\$.17 U

Required:
1. What was the total standard cost of the materials used during August? (Omit the "\$" sign in your
response.)
Standard cost

\$ 11,600

2. How many yards of material are required at standard per kit? (Do not round intermediate
Number of yards

7.25

## yards per kit

3. What was the materials price variance for August if there were no beginning or ending inventories of
materials? (Input all amounts as positive values. Do not round intermediate calculations. Leave
no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance
by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero
Material price variance

\$ 8,000

4. What is the standard direct labor rate per hour? (Omit the "\$" sign in your response.)
Standard direct labor rate

\$6

per DLH

5. What was the labor rate variance for August? The labor efficiency variance? (Input all amounts as
positive values. Do not round intermediate calculations. Leave no cells blank - be certain to
enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable,
"U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "\$" sign in your
response.)
Labor rate variance
Labor efficiency variance

\$ 3,048
\$ 600

U
U

6. What was the variable overhead rate variance for August? The variable overhead efficiency variance?
(Input all amounts as positive values. Do not round intermediate calculations. Leave no cells
blank - be certain to enter "0" wherever required. Indicate the effect of each variance by
selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).
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\$ 180

\$ 200

U
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## Assignment Print View

variance
7. Complete the standard cost card for one kit shown at the beginning of the problem. (Do not round
response.)
Standard Quantity
or Hours
7.25
yards
2.25
hours
2.25
hours

Direct materials
Direct labor

## Standard Price or Rate

\$4 per yard
\$ 6.00
per hour
\$2 per direct labor-hour

Standard Cost
\$ 29.00
13.50
4.50

\$47

rev: 04_27_2012

Worksheet

## Learning Objective: 10-02 Compute the

direct labor efficiency and rate variances
and explain their significance.

## Learning Objective: 10-01 Compute the

direct materials quantity and price
variances and explain their significance.

## Learning Objective: 10-03 Compute the

efficiency and rate variances and explain
their significance.

Vitalite, Inc., produces a number of products, including a body-wrap kit. Standard variable costs relating
to a single kit are given below:

Direct materials
Direct labor

Standard Quantity
or Hours
?
?
?

Standard Price
or Rate
\$4 per yard
?
\$2 per direct
labor-hour

## Total standard cost per kit

Standard
Cost
\$?
?
?
\$47

During August, 400 kits were manufactured and sold. Selected information relating to the months
production is given below:

## Total standard cost*

Actual costs incurred
Materials price variance
Materials quantity variance
Labor rate variance
Labor efficiency variance

Materials Used
?
\$8,000
?
\$ 4,400 U

Direct Labor
\$5,400
?

Variable
Manufacturing
\$1,800
\$1,820

?
?
?
?

## *For the month's production.

The following additional information is available for Augusts production of kits:
Actual direct labor-hours
Difference between standard and actual cost per kit produced during August

1,000
\$.17 U

Required:
1. What was the total standard cost of the materials used during August? (Omit the "\$" sign in your
response.)
Standard cost
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11,600
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## Assignment Print View

2. How many yards of material are required at standard per kit? (Do not round intermediate
Number of yards

## 7.25 yards per kit

3. What was the materials price variance for August if there were no beginning or ending inventories of
materials? (Input all amounts as positive values. Do not round intermediate calculations. Leave
no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance
by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero
Material price variance

8,000 F

4. What is the standard direct labor rate per hour? (Omit the "\$" sign in your response.)
Standard direct labor rate

6 per DLH

5. What was the labor rate variance for August? The labor efficiency variance? (Input all amounts as
positive values. Do not round intermediate calculations. Leave no cells blank - be certain to
enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable,
"U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "\$" sign in your
response.)
Labor rate variance
Labor efficiency variance

\$
\$

3,048 U
600 U

6. What was the variable overhead rate variance for August? The variable overhead efficiency variance?
(Input all amounts as positive values. Do not round intermediate calculations. Leave no cells
blank - be certain to enter "0" wherever required. Indicate the effect of each variance by
selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).
variance

180 F

200 U

7. Complete the standard cost card for one kit shown at the beginning of the problem. (Do not round
response.)

Direct materials
Direct labor

Standard Quantity
or Hours
7.25 yards
2.25 hours
2.25 hours

## Standard Price or Rate

\$4 per yard
\$
6.00 per hour
\$2 per direct labor-hour

Standard Cost
\$
29.00
13.50
4.50
\$47

rev: 04_27_2012
Explanation:
1.

## Total standard cost for units produced during August:

400 kits \$47 per kit
Less standard cost of labor and overhead:
Direct labor
Standard cost of materials used during August

\$18,800
(5,400)
(1,800)
\$11,600

2.

## Standard cost of materials used during August (a)

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\$11,600
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400

## Standard materials cost per kit

Standard materials cost per yard

\$ 29.00

\$4 per yard

## = 7.25 yards per kit

3.

Standard Quantity
Allowed
for Actual Output,
at Standard Price
(SQ SP)

Actual Quantity of
Input, at
Standard Price

Actual Quantity of
Input, at
Actual Price

(AQ SP)

(AQ AP)

2,900 yards**
\$4 per yard*
= \$11,600

4,000 yards
\$4 per yard*
= \$16,000

4,000 yards
\$2 per yard
= \$8,000*

Materials quantity
Materials price
variance = \$4,400 U*
variance = \$8,000 F
Spending variance = \$3,600 F
* Given
** 400 kits 7.25 yards per kit = 2,900 yards
4.

The first step in computing the standard direct labor rate is to determine the standard direct labor-hours
allowed for the months production. The standard direct labor-hours can be computed by working with the
variable manufacturing overhead cost figures because they are based on direct labor-hours worked:
Standard variable manufacturing overhead cost for August (a)
Standard manufacturing variable overhead rate per direct labor-hour (b)

\$ 1,800
\$
2

## Total standard direct labor cost for the month

Total standard direct labor-hours for the month

=
=

900

\$5,400
900 DLHs
\$6 per DLH

5.

Before the labor variances can be computed, the actual direct labor cost for the month must be
computed:
Actual cost per kit produced (\$47.00 + \$.17)
Number of kits produced
Total actual cost of production
Less: Actual cost of materials
Actual cost of manufacturing variable overhead
Actual cost of direct labor

\$ 47.17
400
\$18,868
\$8,000
1,820

9,820
\$ 9,048

## With this information, the variances can be computed:

Standard Hours Allowed
for Actual Output,
at Standard Rate
(SH SR)

\$5,400*

at Standard Rate

## Actual Hours of Input,

at Actual Rate

(AH SR)

(AH AR)

1,000 hours*
\$6 per hour
= \$6,000

\$9,048

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## Labor efficiency variance

Labor rate variance
= \$600 U
= \$3,048 U
Spending variance = \$3,648 U
* Given
6.

## Standard Hours Allowed

for Actual Output,
at Standard Rate
(SH SR)

\$1,800*

at Standard Rate

## Actual Hours of Input,

at Actual Rate

(AH SR)

(AH AR)

1,000 hours*
\$2 per hour*
= \$2,000
efficiency variance
rate variance
= \$200 U
= \$180 F
Spending variance = \$20 U

\$1,820*

* Given
7.

## 900 hours 400 kits = 2.25 hours per kit.

4.

award:

10 out of
10.00
points
Helix Company produces several products in its factory, including a karate robe. The company uses a
standard cost system to assist in the control of costs. According to the standards that have been set for
the robes, the factory should work 780 direct labor-hours each month and produce 3,900 robes. The
standard costs associated with this level of production are as follows:

Direct materials
Direct labor
(based on direct labor-hours)

Total
\$ 88,920
\$ 11,700

Per Unit
of Product
\$ 22.80
3.00

\$ 2,340

0.60
\$ 26.40

During April, the factory worked only 750 direct labor-hours and produced 4,000 robes. The following
actual costs were recorded during the month:

## Direct materials (12,400 yards)

Direct labor

Total
\$ 86,800
\$ 12,800

Per Unit
of Product
\$ 21.70
3.20

\$ 6,000

1.50
\$ 26.40

At standard, each robe should require 3.0 yards of material. All of the materials purchased during the
month were used in production.
Required:
1. Compute the materials price and quantity variances for April: (Input all amounts as positive values.
Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each
variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero
variance). Round your intermediate calculations to 2 decimal places and final answers to the
Materials price variance
Materials quantity variance
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\$ 7,440
\$ 3,040

F
U
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## Assignment Print View

2. Compute the labor rate and efficiency variances for April: (Input all amounts as positive values.
Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each
variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero
variance). Do not round intermediate calculations. Round your final answers to the nearest
Labor rate variance
Labor efficiency variance

\$ 1,553
\$ 750

U
F

3. Compute the variable manufacturing overhead rate and efficiency variances for April: (Input all
amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required.
Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and
"None" for no effect (i.e., zero variance). Round your intermediate calculations to 2 decimal
variance

\$ 3,750

\$ 150

rev: 04_17_2013_QC_28907

Worksheet

## Learning Objective: 10-02 Compute the

direct labor efficiency and rate variances
and explain their significance.

## Learning Objective: 10-01 Compute the

direct materials quantity and price
variances and explain their significance.

## Learning Objective: 10-03 Compute the

efficiency and rate variances and explain
their significance.

Helix Company produces several products in its factory, including a karate robe. The company uses a
standard cost system to assist in the control of costs. According to the standards that have been set for
the robes, the factory should work 780 direct labor-hours each month and produce 3,900 robes. The
standard costs associated with this level of production are as follows:

Direct materials
Direct labor
(based on direct labor-hours)

Total
\$ 88,920
\$ 11,700

Per Unit
of Product
\$ 22.80
3.00

\$ 2,340

0.60
\$ 26.40

During April, the factory worked only 750 direct labor-hours and produced 4,000 robes. The following
actual costs were recorded during the month:

## Direct materials (12,400 yards)

Direct labor

Total
\$ 86,800
\$ 12,800
\$ 6,000

Per Unit
of Product
\$ 21.70
3.20
1.50
\$ 26.40

At standard, each robe should require 3.0 yards of material. All of the materials purchased during the
month were used in production.
Required:
1. Compute the materials price and quantity variances for April: (Input all amounts as positive values.
Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each
variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero
variance). Round your intermediate calculations to 2 decimal places and final answers to the
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## Materials price variance

Materials quantity variance

\$
\$

7,440 F
3,040 U

2. Compute the labor rate and efficiency variances for April: (Input all amounts as positive values.
Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each
variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero
variance). Do not round intermediate calculations. Round your final answers to the nearest
Labor rate variance
Labor efficiency variance

\$
\$

1,550 1%
750 1%

U
F

3. Compute the variable manufacturing overhead rate and efficiency variances for April: (Input all
amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required.
Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and
"None" for no effect (i.e., zero variance). Round your intermediate calculations to 2 decimal
variance

3,750

150

rev: 04_17_2013_QC_28907
Explanation:
1.

## Standard Quantity Allowed

for Actual Output,
at Standard Price
(SQ SP)

Actual Quantity
of Input,
at Standard Price
(AQ SP)

Actual Quantity
of Input,
at Actual Price
(AQ AP)

12,000 yards**
\$7.60 per yard*
= \$91,200

12,400 yards
\$7.60 per yard*
= \$94,240

\$86,800

Materials quantity
variance = \$3,040 U

Materials price
variance = \$7,440 F

## Spending variance = \$4,400 F

*\$22.80 3.0 yards = \$7.6 per yard
**4,000 units 3.0 yards per unit = 12,000 yards
2.

Many students will miss parts 2 and 3 because they will try to use product costs as if they were hourly
costs. Pay particular attention to the computation of the standard direct labor time per unit and the
standard direct labor rate per hour.
Standard Hours
Allowed
for Actual Output,
at Standard Rate
(SH SR)

Actual Hours
of Input,
at Standard Rate

Actual Hours
of Input,
at Actual Rate

(AH SR)

(AH AR)

800 hours**
\$15.00 per hour*
= \$12,000

750 hours
\$15.00 per hour*
= \$11,250

\$12,800

= \$750 F

= \$1,550 U

## Spending variance = \$800 U

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## Assignment Print View

*780 standard hours 3,900 robes = 0.2 standard hour per robe \$3.00 standard cost per robe 0.2
standard hours = \$15.00 standard rate per hour
**4,000 robes .2 standard hour per robe = 800 standard hours
3.

Standard Hours
Allowed
for Actual Output,
at Standard Rate
(SH SR)

Actual Hours of
Input, at the
Standard Rate

Actual Hours
of Input,
at Actual Rate

(AH SR)

(AH AR)

800 hours
\$3.00 per hour*
= \$2,400

750 hours
\$3.00 per hour*
= \$2,250

\$6,000

efficiency variance
= \$150 F

rate variance
= \$3,750 U

## Spending variance = \$3,600 U

*\$.60 standard cost per robe .20 standard hours = \$3.00 standard rate per hour

5.

award:

10 out of
10.00
points
You have recently accepted a position with Lorthen Inc. As part of your duties, you review the variances
that are reported for each period and make a presentation to the company's executive committee.
Earlier this morning you received the variances for one of the company's major products for the most
recent period. After reviewing the variances and organizing the data for your presentation, you
accidentally placed the material on top of some papers that were going to the shredder. In the middle of
lunch you suddenly realized your mistake and dashed to the shredding room. There you found the
operator busily feeding your pages through the machine. You managed to pull only part of one page from
the feeding chute, which contains the following information:
Standard Cost Card
Direct materials, 2.30 meters at \$17.10 per meter
Direct labor, 1.00 hours at \$16.10 per hour
Variable overhead, 1.00 hours at \$9.30 per hour

Direct materials
Direct labor

\$ 39.33
\$ 16.10
\$ 9.30

Total Standard
Quantity or
Cost
Efficiency Variance
\$ 589,950
\$34,200 U
\$ 241,500
\$16,100 U
\$ 139,500
Ruined by shredder

Price or Rate
Variance
\$ 10,585 F
\$ 3,200 U
\$ 4,000 F

The standard for variable overhead is based on direct labor-hours. All of the materials purchased during
the period were used in production.
At lunch your supervisor said how pleased she was with your work and that she was looking forward
to your presentation that afternoon. You realize that to avoid looking like a bungling fool you must
somehow generate the necessary "backup" data for the variances before the executive committee
meeting starts in one hour.
Required:
1. How many units were produced during the period?
Number of units produced

15,000

2. How many meters of direct materials were purchased and used in production?
Number of meters purchased

36,500

3. What was the actual cost per meter of material? (Round your answer to 2 decimal places. Omit
Actual cost per meter
http://ezto.mheducation.com/hm_accounting.tpx?todo=printview

\$ 16.81
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## Assignment Print View

4. How many actual direct labor-hours were worked during the period?
Actual direct labor-hours

16,000

5. What was the actual rate per direct labor-hour? (Round your answer to 2 decimal places. Omit the
Actual rate per direct labor-hour

\$ 16.30

6. How much actual variable manufacturing overhead cost was incurred during the period? (Omit the

\$ 144,800

Worksheet

## Learning Objective: 10-02 Compute the

direct labor efficiency and rate variances
and explain their significance.

## Learning Objective: 10-01 Compute the

direct materials quantity and price
variances and explain their significance.

## Learning Objective: 10-03 Compute the

efficiency and rate variances and explain
their significance.

You have recently accepted a position with Lorthen Inc. As part of your duties, you review the variances
that are reported for each period and make a presentation to the company's executive committee.
Earlier this morning you received the variances for one of the company's major products for the most
recent period. After reviewing the variances and organizing the data for your presentation, you
accidentally placed the material on top of some papers that were going to the shredder. In the middle of
lunch you suddenly realized your mistake and dashed to the shredding room. There you found the
operator busily feeding your pages through the machine. You managed to pull only part of one page from
the feeding chute, which contains the following information:
Standard Cost Card
Direct materials, 2.30 meters at \$17.10 per meter
Direct labor, 1.00 hours at \$16.10 per hour
Variable overhead, 1.00 hours at \$9.30 per hour

Direct materials
Direct labor

\$ 39.33
\$ 16.10
\$ 9.30

Total Standard
Quantity or
Cost
Efficiency Variance
\$ 589,950
\$34,200 U
\$ 241,500
\$16,100 U
\$ 139,500
Ruined by shredder

Price or Rate
Variance
\$ 10,585 F
\$ 3,200 U
\$ 4,000 F

The standard for variable overhead is based on direct labor-hours. All of the materials purchased during
the period were used in production.
At lunch your supervisor said how pleased she was with your work and that she was looking forward
to your presentation that afternoon. You realize that to avoid looking like a bungling fool you must
somehow generate the necessary "backup" data for the variances before the executive committee
meeting starts in one hour.
Required:
1. How many units were produced during the period?
Number of units produced

15,000

2. How many meters of direct materials were purchased and used in production?
Number of meters purchased

36,500

3. What was the actual cost per meter of material? (Round your answer to 2 decimal places. Omit
Actual cost per meter

16.81

4. How many actual direct labor-hours were worked during the period?
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## Actual direct labor-hours

16,000

5. What was the actual rate per direct labor-hour? (Round your answer to 2 decimal places. Omit the
Actual rate per direct labor-hour

16.30

6. How much actual variable manufacturing overhead cost was incurred during the period? (Omit the

144,800

Explanation:
1.

The number of units produced can be computed by using the total standard cost applied for the period
for any inputmaterials, labor, or variable overhead. Using the standard cost applied for materials, we
have:
Total standard cost applied
Standard cost per unit

\$589,950
\$39.33 per unit

= 15,000 units

The same answer can be obtained by using any other cost input.
2 & 3.

## Direct materials analysis:

Standard Quantity Allowed
for Actual Output,
at Standard Price
(SQ SP)

Actual Quantity of
Input,
at Standard Price
(AQ SP)

Actual Quantity of
Input,
at Actual Price
(AQ AP)

34,500 meters*
36,500 meters**
36,500 meters
\$17.10 per meter
\$17.10 per meter
\$16.81 per meter***
= \$589,950
= \$624,150
= \$613,565
Materials quantity variance
Materials price variance
= \$34,200 U
= \$10,585 F
*15,000 units 2.30 meters per unit = 34,500 meters
**\$624,150 \$17.10 per meter = 36,500 meters
***\$613,565 36,500 meters = \$16.81 per meter
4 & 5.

## Direct labor analysis:

Standard Hours Allowed
for Actual Output,
at Standard Rate
(SH SR)

Actual Hours of
Input,
at Standard Rate
(AH SR)

Actual Hours of
Input,
at Actual Rate
(AH AR)

15,000 hours*
16,000 hours**
16,000 hours
\$16.10 per hour
\$16.10 per hour
\$16.30 per hour***
= \$241,500
= \$257,600
= \$260,800
Labor efficiency variance
Labor rate variance
= \$16,100 U
= \$3,200 U
*15,000 units 1.00 hours per unit = 15,000 hours
**\$257,600 \$16.10 per hour = 16,000 hours
***\$260,800 16,000 hours = \$16.30 per hour
6.

Standard Hours Allowed
for Actual Output,
at Standard Rate

Actual Hours of
Input,
at Standard Rate

Actual Hours of
Input,
at Actual Rate

(SH SR)

(AH SR)

(AH AR)

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## Assignment Print View

15,000 hours
16,000 hours
\$9.30 per hour
\$9.30 per hour
= \$139,500
= \$148,800
= \$144,800*
efficiency variance
variance
= \$9,300 U
= \$4,000 F
*\$148,800 \$4,000 = \$144,800

6.

award:

10 out of
10.00
points
Wymont Company produces a single product that requires a large amount of labor time. Overhead cost
is applied on the basis of standard direct labor-hours. Variable manufacturing overhead should be \$7 per
standard direct labor-hour and fixed manufacturing overhead should be \$111,000 per year.
The companys product requires 5 feet of direct material that has a standard cost of \$3.5 per foot. The
product requires 1.4 hours of direct labor time. The standard labor rate is \$15 per hour.
During the year, the company had planned to operate at a denominator activity level of 22,200 direct
labor-hours and to produce 22,500 units of product. Actual activity and costs for the year were as follows:
Number of units produced
24,500
Actual direct labor-hours worked
34,000
Actual variable manufacturing overhead cost incurred \$ 67,000
Actual fixed manufacturing overhead cost incurred
\$ 329,600
Required:
1. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed
Variable rate
Fixed rate

\$ 12
\$7
\$5

per DLH
per DLH
per DLH

2. Complete the standard cost card for the companys product; show the details for all manufacturing
Direct materials, 5.00
feet at \$ 3.50
per foot
Direct labor, 1.40
DLHs at \$ 15.00
per DLH
DLHs at \$ 7.00
per DLH
DLHs at \$ 5.00
per DLH

\$ 17.50
21.00
9.80
7.00

## Standard cost per unit

\$ 55.30

3a. Compute the standard direct labor-hours allowed for the years production.
Standard direct labor hours

34,300

3b. Complete the following Manufacturing Overhead T-account for the year (Input all amounts as
Actual costs

396,600

Applied costs

411,600
15,000

4. Determine the reason for the underapplied or overapplied overhead from (3) above by computing the
variable overhead rate and efficiency variances and the fixed overhead budget and volume variances.
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## Assignment Print View

(Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever
required. Indicate the effect of each variance by selecting "F" for favorable, "U" for

Worksheet

\$ 171,000
\$ 2,100
\$ 218,600
\$ 60,500

F
F
U
F

## Learning Objective: 10A-03 Compute the

Learning Objective: 10A-04 (Appendix
10A) Compute and interpret the fixed
efficiency and rate variances and explain
their significance.

Wymont Company produces a single product that requires a large amount of labor time. Overhead cost
is applied on the basis of standard direct labor-hours. Variable manufacturing overhead should be \$7 per
standard direct labor-hour and fixed manufacturing overhead should be \$111,000 per year.
The companys product requires 5 feet of direct material that has a standard cost of \$3.5 per foot. The
product requires 1.4 hours of direct labor time. The standard labor rate is \$15 per hour.
During the year, the company had planned to operate at a denominator activity level of 22,200 direct
labor-hours and to produce 22,500 units of product. Actual activity and costs for the year were as follows:
Number of units produced
24,500
Actual direct labor-hours worked
34,000
Actual variable manufacturing overhead cost incurred \$ 67,000
Actual fixed manufacturing overhead cost incurred
\$ 329,600
Required:
1. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed
Variable rate
Fixed rate

\$
\$
\$

12 per DLH
7 per DLH
5 per DLH

2. Complete the standard cost card for the companys product; show the details for all manufacturing

Direct materials,
5.00 feet at \$
3.50 per foot
Direct labor,
1.40 DLHs at \$
15.00 per DLH
1.40 DLHs at \$
7.00 per DLH
1.40 DLHs at \$
5.00 per DLH

17.50
21.00
9.80
7.00

## Standard cost per unit

55.30

3a. Compute the standard direct labor-hours allowed for the years production.
Standard direct labor hours

34,300

3b. Complete the following Manufacturing Overhead T-account for the year (Input all amounts as
Actual costs

396,600

Applied costs

http://ezto.mheducation.com/hm_accounting.tpx?todo=printview

411,600
15,000
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## Assignment Print View

4. Determine the reason for the underapplied or overapplied overhead from (3) above by computing the
variable overhead rate and efficiency variances and the fixed overhead budget and volume variances.
(Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever
required. Indicate the effect of each variance by selecting "F" for favorable, "U" for

\$
\$
\$
\$

171,000
2,100
218,600
60,500

F
F
U
F

Explanation:
1.

Total:

\$ 266,400
= \$12 per DLH
22,200 DLHs

Variable:

\$ 155,400
= \$7 per DLH
22,200 DLHs

Fixed:

\$ 111,000
= \$5 per DLH
22,200 DLHs

3a.

3b.

## Applied costs (34,300 standard DLHs \$12.00 per DLH) = 411,600

4.

Standard Hours
Allowed
for Actual Output,
at Standard Rate
(SH SR)

## Actual Hours of Input,

at the Standard Rate
(AH SR)

## Actual Hours of Input,

at Actual Rate
(AH AR)

34,300 DLHs
34,000 DLHs
\$7 per DLH
\$7 per DLH
= \$240,100
= \$238,000
efficiency variance
rate variance
= \$2,100 F
= \$171,000 F

\$67,000

Applied to Work in
Process

Budgeted Fixed

34,300 DLHs
\$5 per DLH
= \$171,500

Actual Fixed

\$111,000
Volume variance
= \$60,500 F

\$329,600
Budget variance
= \$218,600 U

Summary of variances:

http://ezto.mheducation.com/hm_accounting.tpx?todo=printview

2,100 F
171,000 F
60,500 F
218,600 U
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