Question
JTL MANUFACTURING JTL MANUFACTURING Corporation uses very stringent standard costs in evaluating its manufacturing efficiency. These standards are not ideal at this point, but the
JTL MANUFACTURING JTL MANUFACTURING Corporation uses very stringent standard costs in evaluating its manufacturing efficiency. These standards are not ideal at this point, but the management is working toward that as a goal. At present, the company uses the following standards.
Materials | ||||
Item | Per unit | Cost | ||
Metal Plastic Rubber | 1 lb. | 63 per lb. | ||
12 oz. | $1.00 per lb. | |||
4 oz. | 88 per lb. | |||
Direct Labor | ||||
Item | Per unit | Cost | ||
Labor | 15 min. | $8.00 per hr. | ||
Predetermined overhead rate based on direct labor hours = $4.28 The January figures for purchasing, production, and labor are: The company purchased 229,000 pounds of raw materials in January at a cost of 78 a pound. Production used 229,000 pounds of raw materials to make 115,500 units in January. Direct labor spent 18 minutes on each product at a cost of $7.80 per hour. Overhead costs for January totaled $54,673 variable and $73,800 fixed. Instructions Answer the following questions about standard costs. (a) What is the materials price variance? (b) What is the materials quantity variance? (c) What is the total materials variance? (d) What is the labor price variance? (e) What is the labor quantity variance? (f) What is the total labor variance? (g) Evaluate the variances for this company for January. What do these variances suggest to management? the question was posted and answered as the following, but the answer doesn't show the calculations. BUDGETED RATE ACTUAL DIFFERENCE COMMENT UNITS 117500 0 118500 -1000 F Indirect materials 5875 0.05 5925. -50 UNF indirect labor 14100 0.12 14220 -120 UNF utilities 1175. 0.01 1185 -10 UNF Maintenance 8225 0.07 8295 -70 UNF Salaries 42000 0.36 42660 -660 UNF Total 71375 0.61 72285 -910 UNF Evaluation a) materials price variance 2290000 f b ) materials quantity variance 0 no effect c) total materials variance 0 no effect d) labor price variance 3.6 f e) labor quantity variance -24 unf f) labor quantity variance -20.4 unf g) material prices are favourable,but labour is not efficient. |
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