Question
E23-3 Kimm Company has gathered the following information about its product. Direct materials . Each unit of product contains 4.5 pounds of materials. The average
E23-3Kimm Company has gathered the following information about its product.
Direct materials. Each unit of product contains 4.5 pounds of materials. The average
waste and spoilage per unit produced under normal conditions is 0.5 pounds. Materials
cost $5 per pound, but Kimm always takes the 2% cash discount all of its suppliers
offer. Freight costs average $0.25 per pound.
Direct labor.Each unit requires 2 hours of labor. Setup, cleanup, and downtime average
0.3 hours per unit. The average hourly pay rate of Kimm's employees is $12. Payroll
taxes and fringe benefits are an additional $3 per hour.
Manufacturing overhead. Overhead is applied at a rate of $7 per direct labor hour.
Instructions:Compute Kimm's total standard cost per unit.
E23-13 Wales Company purchased (at a cost of $10,800) and used 2,400 pounds of
materials during May. Wales's standard cost of materials per unit produced is based on
2 pounds per unit at a cost $5 per pound. Production in May was 1,070 units.
Instructions:
(a) Compute the total, price, and quantity variances for materials.
(b) Assume Wales also had an unfavorable labor quantity variance. What is a possible
scenario that would provide one cause for the variances computed in (a) and the unfavorable
labor quantity variance?
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