ACTG 2300 Chapter 10: Chapter 10 Textbook Notes

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brownhornet492

7 Nov 2017

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Outcome how to use standard costs to decompose spending variances into two parts: a part that measures how well the acquisition prices of resources were controlled and a part that measures how efficiently those resources were used. Standard quantity per unit defines the amount of direct materials that should be used for each unit of finished product, including an allowance for normal inefficiencies. Standard price per unit defines the price that should be paid for each unit of direct materials and it should reflect the final, delivered cost of those materials. Standard hours per unit defines the amount of direct labor-hours that should be used to produce one unit of finished goods. Standard rate per hour defines the company"s expected direct labor wage rate per hour, including employment taxes and fringe benefits. Standard cost card shows the standard quantity (or hours) and standard price (or rate) of the units required to produce a unit of a specific product.

Related Questions

Problem 10-11 Direct Materials and Direct Labor Variances; Computations from Incomplete Data [LO10-1, LO10-2]

Sharp Company manufactures a product for which the following standards have been set:

	Standard Quantity or Hours		Standard Price or Rate			Standard Cost
Direct materials	3	feet	$	5	per foot	$	15
Direct labor	?	hours		?	per hour		?

During March, the company purchased direct materials at a cost of $45,240, all of which were used in the production of 2,190 units of product. In addition, 4,500 direct labor-hours were worked on the product during the month. The cost of this labor time was $31,500. The following variances have been computed for the month:


Materials quantity variance	$	1,950	U
Labor spending variance	$	3,030	U
Labor efficiency variance	$	780	U

Required:

1. For direct materials:

a. Compute the actual cost per foot of materials for March.

b. Compute the price variance and the spending variance.

2. For direct labor:

a. Compute the standard direct labor rate per hour.

b. Compute the standard hours allowed for the monthâs production.

c. Compute the standard hours allowed per unit of product.

byzantiumlizard838

Diamond Company produces a single product. The company has set thefollowing standards for materials and labor:

	Standard quantity or hours per unit	Standard price or rate
Direct materials	? pounds per unit	$? per pound
Direct labor	3.0 hours per unit	$11 per hour

During the past month, the company purchased 8,200 pounds of directmaterials at a cost of $16,810. All of this material was used inthe production of 1,500 units of product. Direct labor cost totaled$51,920 for the month. The following variances have beencomputed:


Materials quantity variance	$	1,645	U
Total materials variance	$	815	F
Labor efficiency variance	$	1,100	F

Required:
1.	For direct materials:

a.	Compute the standard price per pound of materials. (Round yourintermediate calculations and final answer to 2 decimal places.Omit the "$" sign in your response.)

Standard price

$ per pound

b.	Compute the standard quantity allowed for materials for the month'sproduction. (Round yourintermediate calculations to 2 decimal places.)

Standard quantity

pounds

c.	Compute the standard quantity of materials allowed per unit ofproduct. (Round yourintermediate calculations to 2 decimal places.)

Standard quantity

pounds per unit

2.	For direct labor:

a.	Compute the actual direct labor hours for the month.

Actual direct labor hours

Compute the labor rate variance. (Input the amount as apositive value. Leave no cells blank - be certain to enter "0"wherever required. Indicate the effect of each variance byselecting "F" for favorable, "U" for unfavorable, and "None" for noeffect (i.e., zero variance). Round yourintermediate calculations to 2 decimal places. Omit the "$" sign inyour response.)

Labor rate variance

(Click to select)FUNone

peareel62

Sonne Company produces a perfume called Whim. The direct materialsand direct labor standards for one bottle of Whim are givenbelow:

Direct Materials: Standard Quantity or Hours 7.50 ounces...Standard Rate or Price $2.40 per ounce...Standard Cost $18.00
Direct Labor: Standard Quantity or Hours .80 hours...Standard Priceor rate $7.00 per hour...Standard Cost $5.60

During the most recent month, the following activity wasrecorded:
a. 13,250 ounces of material were purchased at a cost of $2.20 perounce.
b. All of the material was used to produce 1,500 bottles ofWhim.
c. 1,000 hours of direct labor time were recorded at a total laborcost of $9,000.

1. Compute the direct materials price and quantity variances forthe month.
2. Compute the direct labor rate and efficiency variances for themonth.

crimsonminnow486

ACTG 2300 Chapter 10: Chapter 10 Textbook Notes

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