Johnson makes many different handmade products. this period, shemistakenly purchased inferior-quality materials. Which variance ismost likely?
Johnson makes many different handmade products. this period, shemistakenly purchased inferior-quality materials. Which variance ismost likely?
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Bandar Industries Berhad of Malaysia manufactures sportingequipment. One of the company's products, a football helmet for thrNorth American market, requires special plastic. During the quaterending June 30, the company manufactured 70,000 helmets, using45,000kilograms of plastic in the process.The plastic cost thecompany RM342,000. (The in Malaysia is the ringgit, which isdenoted by RM)
According to the standard cost card, each helmet should require0.6 kilograms of plastic, at a cost of RM8 per kilogram.
Required:
1a. How much material in kilograms should havebeen used?
| Total standard kilograms allowed |
1b. What cost for plastic should have beenincurred in the manufacture of the 70,000 helmets?
| Total standard cost | RM |
1c. How much does this cost vary from what wasincurred? (Indicate the effects of each variance by selecting F forfavourable and U for unfavorable, and None for no effect-i.e zerovariance)
| Total material variance | RM |
2. Break the difference computed in part(1-b)into materials price variance and materials quality variance.(Indicate the effect of each variance by eslecting F for favorable,U for unfavorable and None for zero effect.)
| Material variance | RM | ||
| Material quality variance | RM |
I Love My Chocolate Company makes dark chocolate and light chocolate. Both products require cocoa and sugar. The following planning information has been made available:
| Standard Amount per Case | ||||||
| Dark Chocolate | Light Chocolate | Standard Price per Pound | ||||
| Cocoa | 9 lbs. | 6 lbs. | $4.40 | |||
| Sugar | 7 lbs. | 11 lbs. | 0.60 | |||
| Standard labor time | 0.3 hr. | 0.4 hr. | ||||
| Dark Chocolate | Light Chocolate | |||
| Planned production | 5,400 cases | 12,500 cases | ||
| Standard labor rate | $14.50 per hr. | $14.50 per hr. | ||
I Love My Chocolate Company does not expect there to be any beginning or ending inventories of cocoa or sugar. At the end of the budget year, I Love My Chocolate Company had the following actual results:
| Dark Chocolate | Light Chocolate | |||
| Actual production (cases) | 5,100 | 13,000 | ||
| Actual Price per Pound | Actual Pounds Purchased and Used | |||
| Cocoa | $4.50 | 124,500 | ||
| Sugar | 0.55 | 174,200 | ||
| Actual Labor Rate | Actual Labor Hours Used | |||
| Dark chocolate | $14.10 per hr. | 1,390 | ||
| Light chocolate | 14.90 per hr. | 5,330 | ||
Required:
1. Prepare the following variance analyses for both chocolates and the total, based on the actual results and production levels at the end of the budget year:
a. Direct materials price variance, direct materials quantity variance, and total variance.
b. Direct labor rate variance, direct labor time variance, and total variance.
Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. If there is no variance, enter a zero.
| a. | Direct materials price variance | $ | |
| Direct materials quantity variance | $ | ||
| Total direct materials cost variance | $ | ||
| b. | Direct labor rate variance | $ | |
| Direct labor time variance | $ | ||
| Total direct labor cost variance | $ |
2. The variance analyses should be based on the amounts at volumes. The budget must flex with the volume changes. If the volume is different from the planned volume, as it was in this case, then the budget used for performance evaluation should reflect the change in direct materials and direct labor that will be required for the production. In this way, spending from volume changes can be separated from efficiency and price variances.
