Answered step by step
Verified Expert Solution
Question
1 Approved Answer
11 Kemp Tables, Inc. (KTI) makes picnic tables of 2 x 4 planks of treated pine. It sells the tables to large retail discount
11 Kemp Tables, Inc. (KTI) makes picnic tables of 2 x 4 planks of treated pine. It sells the tables to large retail discount stores such as Walmart. After reviewing the following data generated by KTI's chief accountant, the company president, Arianne Darwin, expressed concern that the total manufacturing cost was more than $1.0 million above budget ($7,308,000 - $6,297,600 = $1,010,400). 15 points Cost of planks per table $ Cost of labor per table eBook Total variable manufacturing cost per table (a) Total number of tables produced (b) $ Actual Results 46.00 29.00 75.00 84,000 Master Budget $ 37.80 27.00 $ 64.80 82,000 Total variable manufacturing cost (a x x b) Total fixed manufacturing cost References Total manufacturing cost $6,300,000 1,008,000 $7,308,000 $5,313,600 984,000 $6,297,600 Ms. Darwin asked Conrad Pearson, KTI's chief accountant, to explain what caused the Increase in cost. Mr. Pearson responded that things were not as bad as they seemed. He noted that part of the cost varlance resulted from making and selling more tables than had been expected. Making more tables naturally causes the cost of materials and labor to be higher. He explained that the flexible budget cost variance was less than $1.0 million. Specifically, he provided the following comparison. Cost of planks per table $ Cost of labor per table Total variable manufacturing cost per table (a) Total number of tables produced (b) $ Actual Results 46.00 29.00 75.00 Flexible Budget $ 37.80 27.00 $ 64.80 84,000 84,000 Total variable manufacturing cost (a x b) $6,300,000 $5,443,200 Total fixed manufacturing cost Total manufacturing cost 1,008,000 $7,308,000 984,000 $6,427,200 Based on this information, he argued that the relevant variance for performance evaluation was only $880,800 ($7,308,000 - $6,427,200). Ms. Darwin responded, "Only $880,800! I consider that a very significant number. By the end of the day, I want a full explanation as to what is causing our costs to increase." Required *-1. Based on the following information, determine the total materials cost variance and the price and usage variances. Assuming that the variances are an appropriate Indicator of cause. Actual Data Standard Data Number of planks per table Price per plank 20 18 x$ 2.30 Material cost per table $46.00 * $ 2.10 $37.80 a-2. Based on the following Information, determine the total labor cost variance and the price and usage variances. Assuming that the variances are an appropriate Indicator of cause. Actual Standard Data Number of hours per table 2.9 Data 3.0 Price per hour * $10.00 x$ 9.00 Labor cost per table $29.00 $27.00
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started