Question
Koontz Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for May.
Koontz Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for May. |
Standard Cost per Unit | Actual Cost per Unit | |||||
Direct materials: | ||||||
Standard: 1.80 feet at $1.80 per foot | $ 3.24 | |||||
Actual: 1.75 feet at $2.20 per foot | $ 3.85 | |||||
Direct labor: | ||||||
Standard: 0.90 hours at $19.00 per hour | 17.10 | |||||
Actual: 0.95 hours at $18.40 per hour | 17.48 | |||||
Variable overhead: | ||||||
Standard: 0.90 hours at $6.40 per hour | 5.76 | |||||
Actual: 0.95 hours at $6.00 per hour | 5.70 | |||||
Total cost per unit | $26.10 | $27.03 | ||||
Excess of actual cost over standard cost per unit | $0.93 | |||||
The production superintendent was pleased when he saw this report and commented: This $0.93 excess cost is well within the 5 percent limit management has set for acceptable variances. It's obvious that there's not much to worry about with this product." |
Actual production for the month was 12,000 units. Variable overhead cost is assigned to products on the basis of direct labor-hours. There were no beginning or ending inventories of materials. Required: 1. Compute the following variances for May: a. Material price and quantity variances. b. Labor rate and efficiency variances. c. Variable overhead and efficiency variances. 2. How much of the $0.93 excess unit cost is traceable to each of the variances computed in (1) above.
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