9.23 Standard Costing.handout.pencast
LO3 LO4 Computing Variances and Evaluating Performance
LO5 LO5
P 9. Last year, Biomed Laboratories, Inc., researched and perfected a cure
for the common cold. Called Cold-Gone, the product sells for $28.00 per
package, each of which contains five tablets. Standard unit costs for this
product were developed late last year for use this year. Per package, the
standard unit costs were as follows: chemical ingredients, 6 ounces at $1.00
per ounce; packaging, $1.20; direct labor, 0.8 hour at $14.00 per hour;
standard variable overhead, $4.00 per direct labor hour; and standard fixed
overhead, $6.40 per direct labor hour. Normal capacity is 46,875 units per
week.
In the first quarter of this year, demand for the new product rose well
beyond the expectations of management. During those three months, the
peak season for colds, the company produced and sold over 500,000
packages of Cold-Gone. During the first week in April, it produced 50,000
packages but used materials for 50,200 packages costing $60,240. It also
used 305,000 ounces of chemical ingredients costing $292,800. The total
cost of direct labor for the week was $579,600; direct labor hours totaled
40,250. Total variable overhead was $161,100, and total fixed overhead was
$242,000. Budgeted fixed overhead for the week was $240,000.
Required
1. Compute for the first week of April (a) all direct materials price
variances, (b) all direct materials quantity variances, (c) the direct labor
rate variance, (d) the direct labor efficiency variance, (e) the variable
overhead spending variance, (f) the variable overhead efficiency
variance, (g) the fixed overhead budget variance, and (h) the fixed
overhead volume variance.
2. Manager insight ►Prepare a performance report based on your
variance analysis, and suggest possible causes for each significant
variance.
LO5 Overhead Variances
P 10. Meantime Corporation’s accountant left for vacation before
completing the monthly cost variance report. Gillian Thornton, the
corporation’s president, has asked you to complete the report. The following
data are available to you (capacities are expressed in machine hours):
Actual machine hours
20,100
Standard machine hours allowed
20,500
Actual variable overhead
a
Standard variable overhead rate
$2.00
Variable overhead spending
variance
$200 (F)
Variable overhead efficiency
variance
b
Actual fixed overhead
c
Budgeted fixed overhead
$153,000
Fixed overhead budget variance
$500 (U)
Fixed overhead volume variance
$750 (F)
Normal capacity in machine hours
d
Standard fixed overhead rate
e
Fixed overhead applied
f
Required
Analyze the data and fill in the missing amounts.