Direct Material Price Variance and Lbs

April 4, 2018 General Studies

PROBLEM ON VARIANCE ANALYSIS [pic] Submitted to: PROF. ROSFE CORLAE D. BADUY Submitted by: ADRIAN ERWIN M. PEGASON ERWIN S. FLORES BETA COMPANY Beta Company produces two products, A and B, each of which uses materials X and Y. The following unit standard costs apply: | |Material X |Material Y |Direct Labor | |Product A |4 lbs @ $15 |1 lb @ $9. 50 |1/5 hr @ $18 | |Product B |6 lbs @ $15 |2 lbs @ $9. 0 |1/3 hr @ $18 | During November 4,200 units of A and 3,600 units of B were produced. Also, 39,000 pounds of X were purchased at $14. 40, and 11,000 pounds of Y were purchased at $9. 70; all of these materials (but no other materials) were used for the month’s production. This production required 2,025 direct labor-hours at $17. 50. Questions: 1. Calculate the material price variance and usage variances for the month. 2. Calculate the labor rate and efficiency variances for the month. 3.

How would your answers to Questions 1 and 2 change if you had been told that November’s planned production activity was 4,000 units of A and 4,000 units of B? 4. How would your answers to question 1 and 2 change if you had been told that November’s sales were 4,000 units of A and 3,500 units of B? SOLUTIONS: 1. (a. ) MATERIAL PRICE AND (b. ) USAGE (QUANTITY) VARIANCES Material X a. = (14. 40 – 15) @ 39,000 = 0. 60 F @ 39,000 = 23,400 F b. = (39,000 – ((4,200 @ 4 lbs) + (3,600 @ 6 lbs)() @ 15 = (39,000 – 38,400) @ 15 = 600 UF @ 15 = 9,000 UF Material Y a. = (9. 70 – 9. 50) @ 11,000 = 0. 0 UF @ 11,000 = 2,200 UF b. = (11,000 – ((4,200 @ 1 lbs) + (3,600 @ 2 lbs)() @ 9. 50 = (11,000 – 11,400) @ 9. 50 = 400 F @ 9. 50 = 3,800 F 2. (a. ) LABOR RATE AND (b. ) EFFICIENCY VARIANCES a. = (17. 50 – 18) @ 2,025 = 0. 50 F @ 2,025 = 1,012. 50 F b. = (2,025 – ((4,200 @ 1/5) + (3,600 @ 1/3)() @ 18 = (2,025 – 2,040) @ 18 = 15 F @ 18 = 270 F 3. (1a. ) MATERIAL PRICE AND (1b. ) USAGE VARIANCES @ 4,000 PRODUCTION CAPACITY OF PRODUCT A AND B. Material X a. = (14. 40 – 15) @ 39,000 = 0. 60 F @ 39,000 = 23,400 F b. = (39,000 – ((4,000 @ 4 lbs) + (4,000 @ 6 lbs)() @ 15 = (39,000 – 40,000) @ 15 1,000 F @ 15 = 15,000 F Material Y a. = (9. 70 – 9. 50) @ 11,000 = 0. 20 UF @ 11,000 = 2,200 UF b. = (11,000 – ((4,000 @ 1 lbs) + (4,000 @ 2 lbs)() @ 9. 50 = (11,000 – 12,000) @ 9. 50 = 1,000 F @ 9. 50 = 9,500 F (2a. ) LABOR RATE AND (2b. ) EFFICIENCY VARIANCES a. = (17. 50 – 18) @ 2,025 = 0. 50 F @ 2,025 = 1,012. 50 F b. = (2,025 – ((4,000 @ 1/5) + (4,000 @ 1/3)() @ 18 = (2,025 – 2,133. 33) @ 18 = 108. 33 F @ 18 = 1,950 F 4. (1a. ) MATERIAL PRICE AND (1b. ) USAGE (QUANTITY) VARIANCES @ 4,000 AND 3,500 UNITS SALES OF PRODUCT A AND B RESPECTIVELY. Material X . = (14. 40 – 15) @ 39,000 = 0. 60 F @ 39,000 = 23,400 F b. = (39,000 – ((4,200 @ 4 lbs) + (3,600 @ 6 lbs)() @ 15 = (39,000 – 38,400) @ 15 = 600 UF @ 15 = 9,000 UF Material Y a. = (9. 70 – 9. 50) @ 11,000 = 0. 20 UF @ 11,000 = 2,200 UF b. = (11,000 – ((4,200 @ 1 lbs) + (3,600 @ 2 lbs)() @ 9. 50 = (11,000 – 11,400) @ 9. 50 = 400 F @ 9. 50 = 3,800 F (2a. ) LABOR RATE AND (2b. ) EFFICIENCY VARIANCES c. = (17. 50 – 18) @ 2,025 = 0. 50 F @ 2,025 = 1,012. 50 F d. = (2,025 – ((4,200 @ 1/5) + (3,600 @ 1/3)() @ 18 = (2,025 – 2,040) @ 18 = 15 F @ 18 = 270 F

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