Favorable volume variances may be harmful when production in excess of normal capacity cannot be sold. True or False?
Favorable volume variances may be harmful when production in excess of normal capacity cannot be sold. True or False?
Related questions
Koontz Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for May.
| Standard Cost per Unit | Actual Cost per Unit | |||||
| Direct materials: | ||||||
| Standard: 1.80 feet at $2.40 per foot | $ | 4.32 | ||||
| Actual: 1.75 feet at $2.60 per foot | $ | 4.55 | ||||
| Direct labor: | ||||||
| Standard: 0.90 hours at $14.00 per hour | 12.60 | |||||
| Actual: 0.95 hours at $13.40 per hour | 12.73 | |||||
| Variable overhead: | ||||||
| Standard: 0.90 hours at $3.00 per hour | 2.70 | |||||
| Actual: 0.95 hours at $2.60 per hour | 2.47 | |||||
| Total cost per unit | $ | 19.62 | $ | 19.75 | ||
| Excess of actual cost over standard cost per unit | $ | 0.13 | ||||
The production superintendent was pleased when he saw this report and commented: âThis $0.13 excess cost is well within the 1 percent limit management has set for acceptable variances. It's obvious that there's not much to worry about with this product."
Actual production for the month was 10,000 units. Variable overhead cost is assigned to products on the basis of direct labor-hours. There were no beginning or ending inventories of materials.
Required:
1. Compute the following variances for May:
a. Materials price and quantity variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)
b. Labor rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)
c. Variable overhead rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)
2. How much of the $0.13 excess unit cost is traceable to each of the variances computed in (1) above. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your answers to 2 decimal places.)
3. How much of the $0.13 excess unit cost is traceable to apparent inefficient use of labor time? (Input all values as positive amounts. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round intermediate calculations. Round your final answers to 2 decimal places.)
Perry Company manufactures a number of products. The standardsrelating to one of these products are shown below, along withactual cost data for May.
| Standard Cost per Unit | Actual Cost per Unit | |||||
| Direct materials: | ||||||
| Standard: 1.90 feet at $4.20 per foot | $ | 7.98 | ||||
| Actual: 1.85 feet at $4.60 per foot | $ | 8.51 | ||||
| Direct labor: | ||||||
| Standard: 0.95 hours at $17.00 perhour | 16.15 | |||||
| Actual: 1.00 hours at $16.50 per hour | 16.50 | |||||
| Variable overhead: | ||||||
| Standard: 0.95 hours at $5.00 perhour | 4.75 | |||||
| Actual: 1.00 hours at $4.60 per hour | 4.60 | |||||
| Total cost per unit | $ | 28.88 | $ | 29.61 | ||
| Excess of actual cost over standard cost per unit | $ | 0.73 | ||||
The production superintendent waspleased when she saw this report and commented: "This $0.73 excesscost is well within the 4 percent limit management has set foracceptable variances. Itâs obvious that thereâs not much to worryabout with this product." |
| Actual production for the monthwas 18,000 units. Variable overhead cost is assigned to products onthe basis of direct labor-hours. There were no beginning or endinginventories of materials. 1. Compute the following variances for May: A.) Materials price and quantity variances. (Input allamounts as positive values. Indicate the effect of each variance byselecting "F" for favorable, "U" for unfavorable, and "None" for noeffect (i.e., zero variance).) B.) Labor rate and efficiency variances.(Input all amounts as positive values. Indicate the effectof each variance by selecting "F" for favorable, "U" forunfavorable, and "None" for no effect (i.e., zerovariance).) C.) Variable overhead rate and efficiencyvariances. (Input all amounts as positive values. Indicatethe effect of each variance by selecting "F" for favorable, "U" forunfavorable, and "None" for no effect (i.e., zerovariance).) 2. How much of the $0.73 excess unit cost is traceable to eachof the variances computed in (1) above. (Input all amountsas positive values. Indicate the effect of each variance byselecting "F" for favorable, "U" for unfavorable, and "None" for noeffect (i.e., zero variance). Round your answers to 2 decimalplaces.) 3. How much of the $0.73 excess unit cost istraceable to apparent inefficient use of labor time? (Inputall amounts as positive values. Indicate the effect of eachvariance by selecting "F" for favorable, "U" for unfavorable, and"None" for no effect (i.e., zero variance). Do not roundintermediate calculations. Round your final answers to 2 decimalplaces.) |
