The standard price and quantity of direct materials are separated because
a. GAAP and IFRS reporting requires separation
b. Direct materials prices are controlled by the purchasing department, and quantity used is controlled by the production department
c. Standard prices are more difficult to estimate than standard quantities
d. Standard quantities change more frequently than standard prices
The standard price and quantity of direct materials are separated because
a. GAAP and IFRS reporting requires separation
b. Direct materials prices are controlled by the purchasing department, and quantity used is controlled by the production department
c. Standard prices are more difficult to estimate than standard quantities
d. Standard quantities change more frequently than standard prices
Related questions
Genuine Spice Inc. began operations on January 1, 2016. Thecompany produces eight-ounce bottles of hand and body lotion calledEternal Beauty. The lotion is sold wholesale in 12-bottle cases for$100 per case. There is a selling commission of $20 per case. TheJanuary direct materials, direct labor, and factory overhead costsare as follows:
DIRECT MATERIALS | ||||
Cost Behavior | Units per Case | Cost per Unit | Cost per Case | |
Cream base | Variable | 100 ozs. | $0.02 | $ 2.00 |
Natural oils | Variable | 30 ozs. | 0.30 | 9.00 |
Bottle (8-oz.) | Variable | 12 bottles | 0.50 | 6.00 |
$17.00 | ||||
DIRECT LABOR | ||||
Department | Cost Behavior | Time per Case | Labor Rate per Hour | Cost per Case |
Mixing | Variable | 20 min | $18.00 | $6.00 |
Filling | Variable | 5 | 14.40 | 1.20 |
25 min. | $7.20 | |||
FACTORY OVERHEAD | ||
Cost Behavior | Total Cost | |
Utilities | Mixed | $600 |
Facility lease | Fixed | 14,000 |
Equipment depreciation | Fixed | 4,300 |
Supplies | Fixed | 660 |
$19,560 | ||
During September of the current year, the controller was askedto perform variance analyses for August. The January operating dataprovided the standard prices, rates, times, and quantities percase. There were 1,500 actual cases produced during August, whichwas 250 more cases than planned at the beginning of the month.Actual data for August were as follows:
Actual Direct Materials | |||
|---|---|---|---|
Price per Unit | Quantity per Case | ||
Cream base | $0.016 per oz. | 102 ozs. | |
Natural oils | $0.32 per oz. | 31 ozs. | |
Bottle (8-oz.) | $0.42 per bottle | 12.5 bottles | |
Actual Direct | Actual Direct Labor | ||
Labor Rate | Time per Case | ||
Mixing | $18.20 | 19.50 min. | |
Filling | 14.00 | 5.60 min. | |
Actual variable overhead | $305.00 |
|---|---|
Normal volume | 1,600 cases |
The prices of the materials were different than standard due tofluctuations in market prices. The standard quantity of materialsused per case was an ideal standard. The Mixing Department used ahigher grade labor classification during the month, thus causingthe actual labor rate to exceed standard. The Filling Departmentused a lower grade labor classification during the month, thuscausing the actual labor rate to be less than standard.
| 1. Determine and interpret the direct materials price andquantity variances for the three materials.
2. Determine the direct labor rate and time variances forthe two departments. Round hours to the nearest tenth of anhour.
3. Determine and interpret the factory overhead controllablevariance.
4. Determine and interpret the factory overhead volumevariance. Round rate to four decimal places.
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1. A company is considering the purchase of a new pieceof equipment for $132,000. Predicted annual cash inflows from thisinvestment are $52,800 (year 1); $44,000 (year 2); $26,400 (year3); $20,400 (year 4); and $10,200 (year 5). The payback periodis: |
4.43 years.
2.43 years.
3.43 years
3.00 years.
3.04 years.
| 2. Data pertaining to a company's joint manufacturingprocess for the current period follows: |
| Product A | Product B | |
| Quantities produced | 300 lbs. | 200 lbs. |
| Processing cost after products are separated | $3,100 | $2,300 |
| Market value at point of separation | $7/lb. | $14/lb. |
What cost amount should be allocated to Product A for thisperiod's $2,940 of joint costs on the basis of market value at thepoint of separation? |
$1,252
$930
$1,260
$1,688
$1,764
| 3. The following company information is available forJanuary: |
| Direct materials used | 3,700 feet @ $56 per foot |
| Standard costs for direct materials for Januaryproduction | 3,910 feet @ $54 per foot |
| The direct material quantity variance is: |
$7,400 favorable.
$7,400 unfavorable.
$11,340 favorable.
$11,340 unfavorable.
$3,940 favorable.
| 4. The following company information isavailable: |
| Direct materials used for production | 38,500 gallons |
| Standard quantity for units produced | 37,000 gallons |
| Standard cost per gallon of direct material | $6.50 |
| Actual cost per gallon of direct material | $7.10 |
| The direct materials price variance is: |
$23,100 unfavorable.
$32,850 unfavorable.
$32,850 favorable.
$9,750 unfavorable.
$2,500 unfavorable.
5.
| The following company information isavailable: |
| Direct materials used for production | 726 pounds |
| Standard quantity for units produced | 778 pounds |
| Standard cost per pound of direct material | $48.70 |
| Actual cost per pound of direct material | $51.40 |
| The direct materials quantity variance is: |
$1,960.40 favorable.
$2,532.40 unfavorable.
$572.20 favorable.
$1,960.40 unfavorable.
$2,532.40 favorable.
