Question
Genuine Spice Inc. began operations on January 1 of the current year. The company produces eight- ounce bottles of hand and body lotion called Eternal
Genuine Spice Inc. began operations on January 1 of the current year. The company produces eight- ounce bottles of hand and body lotion called Eternal Beauty. The lotion is sold wholesale in 12-bottle cases for $100 per case. There is a selling commission of $20 per case. The January direct materials, direct labor, and factory overhead costs are as follows:
DIRECT MATERIALS | ||||
Cost Behavior | Units per Case | Cost per Unit | Cost per Case | |
Cream base | Variable | 100 oz. | $0.02 | $ 2.00 |
Natural oils | Variable | 30 oz. | 0.30 | 9.00 |
Bottle (8-oz.) | Variable | 12 bottles | 0.50 | 6.00 |
$17.00 |
DIRECT LABOR | ||||
Department | Cost Behavior | Time per Case | Labor Rate per Hour | Cost per Case |
Mixing | Variable | 20 min. | $18.00 | $6.00 |
Filling | Variable | 5 | 14.40 | 1.20 |
25 min. | $7.20 |
FACTORY OVERHEAD | ||
Cost Behavior | Total Cost | |
Utilities | Mixed | $600 |
Facility lease | Fixed | 14,000 |
Equipment depreciation | Fixed | 4,300 |
Supplies | Fixed | 660 |
$19,560 |
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Part CAugust Variance Analysis
During September of the current year, the controller was asked to perform variance analyses for August. The January operating data provided the standard prices, rates, times, and quantities per case. There were 1,500 actual cases produced during August, which was 250 more cases than planned at the beginning of the month. Actual data for August were as follows:
Actual Direct Materials | ||
Price per Unit | Quantity per Case | |
Cream base | $0.016 per oz. | 102 oz. |
Natural oils | $0.32 per oz. | 31 oz. |
Bottle (8-oz.) | $0.42 per bottle | 12.5 bottles |
Actual Direct | Actual Direct Labor | |
Labor Rate | Time per Case | |
Mixing | $18.20 | 19.50 min. |
Filling | 14.00 | 5.60 min. |
Actual variable overhead | $305.00 |
Normal volume | 1,600 cases |
The prices of the materials were different from standard due to fluctuations in market prices. The standard quantity of materials used per case was an ideal standard. The Mixing Department used a higher grade labor classification during the month, thus causing the actual labor rate to exceed standard. The Filling Department used a lower grade labor classification during the month, thus causing the actual labor rate to be less than standard
Required-Part C: | |
11. | Determine and interpret the direct labor rate and time variances for the two departments. Round hours to the nearest tenth of an hour. |
Text Version of the question:
11. Determine and interpret the direct labor rate and time variances for the two departments. Round hours to the nearest tenth of an hour. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount.
Direct Labor Rate Variance | ||||
Mixing Department | Filling Department | |||
Difference | ||||
X | ||||
Direct labor rate variance |
Direct Labor Time Variance | ||||
Mixing Department | Filling Department | |||
Difference | ||||
X | ||||
Direct labor time variance |
The change in the caused the labor rate variances. This change have been responsible for the direct labor time variance.
11. Determine and interpret the direct labor rate and time variances for the two departments. Round hours to the nearest tenth of an hour. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount Direct Labor Rate Variance Mixing Department Filling Department Difference Direct labor rate variance Direct Labor Time Variance Mixing Department Filling Department Difference Direct labor time variance The change in the caused the labor rate variances. This change have been responsible for the direct labor time varianceStep by Step Solution
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