Question 1(Accounting)
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Question-1
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 1,000 direct labor-hours each month and produce 2,000 robes. The standard costs associated with this level of production are as follows:
TotalPer Unitof Product
Direct materials $ 41,400 $ 20.70
Direct labor $ 8,000 4.00
Variable manufacturing overhead (based on direct labor-hours)
$ 3,400 1.70
$ 26.40
During April, the factory worked only 1,100 direct labor-hours and produced 2,400 robes. The following actual costs were recorded during the month:
TotalPer Unitof Product
Direct materials (8,200 yards) $ 48,000 $ 20.00
Direct labor $ 10,080 4.20
Variable manufacturing overhead$ 4,320 1.80
$ 26.00
At standard, each robe should require 3.00 yards of material. All of the materials purchased during the month were used in production.
1. Compute the materials price and quantity variances for April: (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.)
2. Compute the labor rate and efficiency variances for April:(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.)
3. Compute the variable manufacturing overhead rate and efficiency variances for April: (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.)
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1. Compute the materials price and quantity variances for April:
Solution-
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)
7,200 yards**$6.9 per Yard=$49,680
8,200 yards*$6.9 per Yard=$56,580 $48,000
*$20.70/3.0 Yards=$6.9 per Yard
**2,400 Units*3.0 yards per unit = 7,200 Yards
Material Quantity Variance=$49,680-$56,580= $6,900U
Material Price Variance=$56,580-$48,000= $8,580F
Spending Variance=$6,900-$8,580=$1,680F
2. Compute the labor rate and efficiency variances for April:
Solution-
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(AQ*AP)
480 hours*$20.00 per hour=$9,600
1,100 hours*$20.00 per hour=$22,000 $10,080
*1,000 standard hours/ 2,000robes=0.2 standard hours per robe
$4.0 standard cost per robe/0.2 standard hours = $20.0 standard rate
**2,400 robes*0.2 standard hours per robe = 480 standard hours
Labor efficiency Variance=$9,600-$22,000= $12,400F
Labor rate Variance=$22,000-$10,080= $11,920U
Spending Variance=$12,400-$11,920=$480F
3. Compute the variable manufacturing overhead rate and efficiency variances for April:
Solution-Variable Overhead Spending Variance = AH x (AR-SR) =1,100 hours ($3.92 per hour -$20.00 per hour) =$17,688F
Variable Overhead Efficiency Variance = SR x (AH-SH) =$3.92 per hour (1,100 hours-480 hours)=$2,430U
Total Variable Overhead Variance = SV + EV = =$17,688F +$2,430U=$15,258U