In reviewing the activities of the Mixing Department for the month of June, the manager of the department notices that there was an unfavorable materials price variance for the month and there was an unfavorable materials quantity variance. Under what circumstances, if any, can the responsibility for each variance be placed on (a) the purchasing department and (b) the production department?
Related questions
| MULTIPLE CHOICE: Use the following information for questions 12-14 Healthy Co. has the following standard cost to produce a kingsize party sub. DM 4 lbs @ $3.00 per lb. = $12.00 per sub DL ½ hour @ $8.00 per hour = $4.00 per sub During December, Healthy Co. produced 1,000 party subs, boughtand used 4,100 of meat at $3.20 per lb. and used 490 hours of laborat a total cost of $4,018. |
| 12. What is the direct material price variance? A. $800 favorable B. $820 unfavorable C. $800 unfavorable D. $820 favorable |
| 13. What is the direct labor rate variance? A. $98 favorable B. $98 unfavorable C. $100 favorable D. $100 unfavorable |
| 14. What is the direct labor efficiency variance? A. $80 favorable B. $80 unfavorable C. $82 favorable D. $82 unfavorable |
| 15. In capital budgeting decisions, the focus is on: A. Cash flow B. Accounting net income C. Working capital D. Inventory E. Raw material |
| 16. Which department may be responsible for an unfavorablematerials quantity variance? A. finance department B. production department C. purchasing department D. sales department |
Costello Corporation manufactures a single product. The standardcost per unit of product is shown below.
Direct materialsâ2 pound plastic at $6.89 per pound | $ 13.78 | |
Direct laborâ2.00 hours at $11.00 per hour | 22.00 | |
Variable manufacturing overhead | 14.00 | |
Fixed manufacturing overhead | 10.00 | |
Total standard cost per unit | $59.78 |
The predetermined manufacturing overhead rate is $12 per directlabor hour ($24.00 ÷ 2.00). It was computed from a mastermanufacturing overhead budget based on normal production of 11,800direct labor hours (5,900 units) for the month. The master budgetshowed total variable costs of $82,600 ($7.00 per hour) and totalfixed overhead costs of $59,000 ($5.00 per hour). Actual costs forOctober in producing 3,500 units were as follows.
Direct materials (7,180 pounds) | $ 50,475 | |
Direct labor (6,860 hours) | 77,381 | |
Variable overhead | 61,738 | |
Fixed overhead | 24,472 | |
Total manufacturing costs | $214,066 |
The purchasing department buys the quantities of raw materials thatare expected to be used in production each month. Raw materialsinventories, therefore, can be ignored.
(a) Compute all of the materials and laborvariances. (Round answers to 0 decimal places, e.g.125.)
Total materials variance | $ | UnfavorableFavorableNeither favorable nor unfavorable | ||
Materials price variance | $ | Neither favorable nor unfavorableFavorableUnfavorable | ||
Materials quantity variance | $ | FavorableUnfavorableNeither favorable nor unfavorable | ||
Total labor variance | $ | UnfavorableFavorableNeither favorable nor unfavorable | ||
Labor price variance | $ | UnfavorableNeither favorable nor unfavorableFavorable | ||
Labor quantity variance | $ | FavorableUnfavorableNeither favorable nor unfavorable |
(b) Compute the total overhead variance.
Total overhead variance | $ | FavorableNeither favorable nor unfavorableUnfavorable |
