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EXERCISE 12-1
2.
Standard Quantity Allowed
Actual Quantity of Input, Actual Quality of Input, for Actual Output,
at Actual Price at Standard Price at Standard Price
(AQ × AP) (AQ × SP) (SQ × SP)
22,500 kilograms × 22,500 kilograms × 21,500 kilograms ×
$7.6 per kiligrams $8 per kiligrams $8 per kiligrams
= $171,000 = 180,000 = $168,000
1.
Number of meals prepared ........................................ 4,000
Standard direct labor-hours per meal ......................... x 0.25
Total direct labor-hours allowed ................................. 1,000
Standard direct labor cost per hour ............................ x 9.75
Total standard direct labor cost .................................. $9,750
2.
Standard Hours Allowed
Actual Hours of Input, Actual Hours of Input, for Actual Output,
at Actual Rate at Standard Rate at Standard Rate
(AH × AR) (AH × SR) (SH × SR)
960 hours × 960 hours × 1,000 hours ×
$10.00 per hour $9.75 per hour $9.75 per hour
= $9,600 = $9,360 = $9,750
2.
Standard Hours Allowed
Actual Hours of Input, Actual Hours of Input, for Actual Output,
at Actual Rate at Standard Rate at Standard Rate
(AH × AR) (AH × SR) (SH × SR)
2,300 hours × 2,300 hours × 2,400 hours ×
$3.2 per hour $3.25 per hour $3.25 per hour
= $7,360 = $7,475 = $7,800
49,200 pounds ×
$2 per pound
= $98,400
2. Summary of variances:
The net unfavorable variance of $16,290 for the month caused the plant’s variable cost of
goods sold to increase from the budgeted level of $180,000 to $196,290:
This $16,290 net unfavorable variance also accounts for the difference between the
budgeted net operating income and the actual net operating income for the month.
3. The two most significant variances are the materials quantity variance and the labor
efficiency variance. Possible causes of the variances include:
Labor efficiency variance: Poorly trained workers, poor quality materials, faulty
equipment, work interruptions, inaccurate standards,
insufficient demand.
PROBLEM 12-11
1. The standard quantity of plates allowed for tests performed during the month would be:
2. b. The policy probably should not be continued. Although the hospital is saving $2 per hour
by employing more assistants relative to the number of senior technicians than other
hospitals, this savings is more than offset by other factors. Too much time is being taken
in performing lab tests, as indicated by the large unfavorable labor efficiency variance.
And, it seems likely that most (or all) of the hospital’s unfavorable quantity variance for
plates is traceable to inadequate supervision of assistants in the lab.
3. The variable overhead variances follow:
Standard Hours Allowed
Actual Hours of Input, Actual Hours of Input, for Actual Output,
at Actual Rate at Standard Rate at Standard Rate
(AH × AR) (AH × SR) (SH × SR)
1,150 hours x 1,150 hours × 900 hours* ×
$6.8 per hour $6 per hour $6 per hour
= $7,820 = $6,900 = $5,400
* (0.3 hours per test x 1,800 blood test) + (0.15 hours per test x 2,400 smears test) = 900 hours
Yes, there is a relation between the variable overhead efficiency variance and the labor efficiency
variance. Both are computed by comparing actual labor time to the standard hours allowed for
the output of the period. Thus, if there is an unfavorable labor efficiency variance, there will also
be an unfavorable variable overhead efficiency variance.
PROBLEM 12-14
4. Since there was no beginning or ending inventories of materials, all of the materials that were
purchased during the period were used in production. Therefore, the sum of the price and
quantity variances equals the spending variance, which is the difference between the actual
cost and standard cost of materials used in production.
In this case the price and quantity variances together equal the spending variance. If the quantity
variance is $1,200 U, then the price variance must be:
Price Variance + Quantity Variance = Spending Variance
Price Variance + $1,200 = $1,800 F
Price Variance = -1,800 – 1,200 = $3,000 F
Alternatively, can be calculated like this:
Price variance
5. The first step in computing the standard direct labor rate is to determine the standard direct
labor-hours allowed for the month’s 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:
6. Before the labor variances can be computed, the actual direct labor cost for the month must
be computed:
*Given.
7.
Standard Hours Allowed
Actual Hours of Input, Actual Hours of Input, for Actual Output,
at Actual Rate at Standard Rate at Standard Rate
(AH × AR) (AH × SR) (SH × SR)
1,500 hours* × $3 per hour*
$3,600* = $4,500 $4,200*
*Given.
8. Standard
Quantity or Hours Standard Price or Standard
per Kit Rate Cost per Kit
Direct materials............................. 2.8 yards* $ 6 per yard $16.80
Direct labor ................................... 1.4 hours** $7.5 per hour*** 10.50
Variable manufacturing overhead . 1.4 hours $ 3 per hour 4.20
Total standard cost per kit ............. $31.50
* From part 3
** 1,400 hours (from part 5) ÷ 1,000 kits = 1.4 hours per kit.
*** From part 5