Question
I need help with: A- price variance (my answer was 46,920 and it is incorrect) C- Price Variance (my answer was 526,048 and it is
I need help with:
A- price variance (my answer was 46,920 and it is incorrect)
C- Price Variance (my answer was 526,048 and it is incorrect)
Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 128,000 liters at a budgeted price of $285 per liter this year. The standard direct cost sheet for one liter of the preservative follows.
| Direct materials | (2 pounds @ $18) | $ | 36 | |
| Direct labor | (0.5 hours @ $52) | 26 | ||
Variable overhead is applied based on direct labor hours. The variable overhead rate is $160 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $80 per unit. All non-manufacturing costs are fixed and are budgeted at $2.6 million for the coming year.
At the end of the year, the costs analyst reported that the sales activity variance for the year was $858,000 unfavorable.
The following is the actual income statement (in thousands of dollars) for the year.
| Sales revenue | $ | 35,098 | |
| Less variable costs | |||
| Direct materials | 3,718 | ||
| Direct labor | 3,110 | ||
| Variable overhead | 9,230 | ||
| Total variable costs | $ | 16,058 | |
| Contribution margin | $ | 19,040 | |
| Less fixed costs | |||
| Fixed manufacturing overhead | 1,190 | ||
| Non-manufacturing costs | 1,370 | ||
| Total fixed costs | $ | 2,560 | |
| Operating profit | $ | 16,480 | |
During the year, the company purchased 204,000 pounds of material and employed 54,400 hours of direct labor. Required: a. Compute the direct material price and efficiency variances. b. Compute the direct labor price and efficiency variances. c. Compute the variable overhead price and efficiency variances. (For all requirements, enter your answers in whole dollars. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
| a. | Direct materials: | ||
| Price variance | $46,920selected answer incorrect | Uselected answer correct | |
| Efficiency variance | $720,000selected answer correct | Fselected answer correct | |
| b. | Direct labor: | ||
| Price variance | $281,200selected answer correct | Uselected answer correct | |
| Efficiency variance | $343,200selected answer correct | Fselected answer correct | |
| c. | Variable overhead: | ||
| Price variance | $526,048selected answer incorrect | Uselected answer correct | |
| Efficiency variance | $1,056,000selected answer correct | Fselected answer correct | |
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Management Accounting
Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Phillip Beaulieu
6th Canadian edition
013257084X, 1846589207, 978-0132570848
