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Dautrich, Inc. is a privately held furniture manufacturer. For August 2017, Dautrich had the following standards for one of its products, a wicker chail
Dautrich, Inc. is a privately held furniture manufacturer. For August 2017, Dautrich had the following standards for one of its products, a wicker chail This Direct materials Direct manufacturing labor Standards per Chair 2 square yards of input at $ 5.60 per square yard 0.5 hour of input at $ 10.40 per hour The following data were compiled regarding actual performance: actual output units (chairs) produced, 2,300; square yards of input purchased and used, 4,300; price per square yard, $5.70; direct manufacturing labor costs, $9,991; actual hours of input, 970; labor price per hour, $10.30. Requirement 1. Show computations of price and efficiency variances for direct materials and direct manufacturing labor. Give a plausible explanation of why each variance occurred. Let's begin by determining the formula used to calculate the actual costs of direct materials, then enter the amounts in the formula and calculate the cost. Actual cost X Direct materials Next we will calculate the actual input at the budgeted price. Actual input Direct materials Direct manufacturing labor X Direct materials Direct manufacturing labor Determine the formula and calculate the costs for the flexible budget. X X X X X Budgeted price = H 11 = Cost = Flexible budget cost = Now compute the price and efficiency variances for direct materials and direct manufacturing labor. Label each variance as favorable (F) or unfavorable (U). Efficiency variances Direct materials Direct manufacturing labor Price variances Requirement 2. Suppose 6,700 square yards of materials were purchased (at $5.70 per square yard), even though only 4,300 square yards were used. Suppose further that variances are identified at their most timely control point; accordingly, direct materials price variances are isolated and traced at the time of purchase to the purchasing department rather than to the production department. Compute the price and efficiency variances under this approach. Begin with recalculating the costs using the information provided for the alternative approach. Actual input Actual cost X Budgeted price Flexible budget cost Purchasing Production Now compute the direct materials price and efficiency variances. Label each variance as favorable (F) or unfavorable (U). Direct materials Price variance Efficiency variance Choose from any list or enter any number in the input fields and then continue to the next question.
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