Question
11#1 Earthern Ware is a manufacturer of large flower pots for urban settings. The company has these standards: LOADING... (Click the icon to view the
11#1
Earthern Ware
is a manufacturer of large flower pots for urban settings. The company has these standards:
LOADING...
(Click the icon to view the standards.)
LOADING...
(Click the icon to view the actual results.)Read the requirements
LOADING...
.
Requirement 1. Compute the direct material price variance and the direct material quantity variance. (Enter the variances as positive numbers. Enter currency amounts in the formula to the nearest cent and then round the final variance amount to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U). Abbreviations used: DM = Direct materials)
First determine the formula for the price variance, then compute the price variance for direct materials.
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| ( |
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| ) | = | DM price variance | |
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Determine the formula for the quantity variance, then compute the quantity variance for direct material.
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| ( |
| - |
| ) | = | DM quantity variance | |
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| - |
| ) | = |
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Requirement 2. Who is generally responsible for each variance?
The
marketing
production
purchasing
sales
department is responsible for the materials price variance. The
marketing
purchasing
production
sales
department is responsible for the materials quantity variance.
Requirement 3. Interpret the variances.
The
favorable
unfavorable
materials price variance means that the actual price
Grand Ceramics'
personnel paid for resin
did not exceed
exceeded
the standard budgeted price for resin. The
favorable
unfavorable
materials quantity variance means that
Grand Ceramics'
employees used
less
more
resin than they should have to produce
1,900
pots.
Standards
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Direct materials (resin). . . . . . . . . . . . . . . . . . . . . . . . . . . | 8 pounds per pot at a cost of $5.00 per pound |
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Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3.0 hours at a cost of $16.00 per hour |
Standard variable manufacturing overhead rate. . . . . | $3.00 per direct labor hour |
Budgeted fixed manufacturing overhead. . . . . . . . . . . | $30,200 |
Standard fixed MOH rate. . . . . . . . . . . . . . . . . . . . . . . . . | $6.00 per direct labor hour (DLH) |
Actual results
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Earthern Ware
allocated fixed manufacturing overhead to production based on standard direct labor hours. Last month, the company reported the following actual results for the production of
1,900
flower pots:
Direct materials. . . . . . . . . . . . . . . . . . . | Purchased 17,030 pounds at a cost of $5.30 per pound; used 16,530 pounds to produce 1,900 pots |
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Direct labor. . . . . . . . . . . . . . . . . . . . . . . | Worked 3.3 hours per flower pot (6,270 total DLH) at a cost of $15.00 per hour |
Actual variable manufacturing overhead. . . . . . . . . . . . . . . . . . . . . . . . . | $3.60 per direct labor hour for total actual variable manufacturing overhead of $22,572 |
Actual fixed manufacturing overhead | $29,500 |
Standard fixed manufacturing overhead allocated based on actual production. . . . . . . . . . . . . . . . . . . . . . . | $34,200 |
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