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Michiana Company's Benton Harbor Plant produces precast ingots for industrial use. Angelo Lorenzo, who was recently appointed general manager of the Benton Harbor Plant, has
Michiana Company's Benton Harbor Plant produces precast ingots for industrial use. Angelo Lorenzo, who was recently appointed general manager of the Benton Harbor Plant, has just been handed the plant's contribution format income statement for October. The statement is shown below: tableBudgeted Actual,,Sales ingots$ Variable expenses: Variable cost of goods sold Variable selling expenses Total variable expenses Contribution margin Fixed expenses: Manufacturing overhead Selling and administrative Total fixed expenses Net operating income loss $$ Mr Lorenzo was shocked to see the loss for the month, particularly because sales were exactly as budgeted. He stated, "I sure hope the plant has a standard cost system in operation. If it doesn't, I won't have the slightest idea of where to start looking for the problem." The plant does use a standard cost system, with the following standard variable cost per ingot: tabletableStandardQuantityor HourstableStandard Priceor RatetableStandardCostDirect materials, pounds,fbbdfcffee table perpound$ Required: Assume that the company recognizes price variances when materials are purchased. Compute the following variances for October: a Direct materials price and quantity variances. Input all amounts as positive values. Indicate the effect of each variance by selecting F for favorable, U for unfavorable, and "None" for no effect ie zero variance tableMaterials price variance,,Materials quantity variance,, b Direct labor rate and efficiency variances. Input all amounts as positive values. Indicate the effect of each variance by selecting F for favorable, U for unfavorable, and "None" for no effect ie zero variance tableLabor rate variance,Labor efficiency variance, c Variable overhead rate and efficiency variances. Input all amounts as positive values. Indicate the effect of each variance by selecting F for favorable, U for unfavorable, and "None" for no effect ie zero variance tableVariable overhead rate variance,,tableVariable overhead efficiencyvariance Summarize the variances that you computed in above by showing the net overall favorable or unfavorable variance for October. Input all amounts as positive values. Indicate the effect of variance by selecting F for favorable, U for unfavorable, and "None" for no effect ie zero variance Pick out the two most significant variances that you computed in above. You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Materials price variance Materials quantity variance Variable overhead efficiency variance Labor rate variance Variable overhead rate variance Labor efficiency variance
Michiana Company's Benton Harbor Plant produces precast ingots for industrial use. Angelo Lorenzo, who was recently appointed general manager of the Benton Harbor Plant, has just been handed the plant's contribution format income statement for October. The statement is shown below:
tableBudgeted Actual,,Sales ingots$
Variable expenses:
Variable cost of goods sold
Variable selling expenses
Total variable expenses
Contribution margin
Fixed expenses:
Manufacturing overhead
Selling and administrative
Total fixed expenses
Net operating income loss $$
Mr Lorenzo was shocked to see the loss for the month, particularly because sales were exactly as budgeted. He stated, "I sure hope the plant has a standard cost system in operation. If it doesn't, I won't have the slightest idea of where to start looking for the problem."
The plant does use a standard cost system, with the following standard variable cost per ingot:
tabletableStandardQuantityor HourstableStandard Priceor RatetableStandardCostDirect materials, pounds,fbbdfcffee
table perpound$
Required:
Assume that the company recognizes price variances when materials are purchased. Compute the following variances for October:
a Direct materials price and quantity variances. Input all amounts as positive values. Indicate the effect of each variance by selecting F for favorable, U for unfavorable, and "None" for no effect ie zero variance
tableMaterials price variance,,Materials quantity variance,,
b Direct labor rate and efficiency variances. Input all amounts as positive values. Indicate the effect of each variance by selecting F for favorable, U for unfavorable, and "None" for no effect ie zero variance
tableLabor rate variance,Labor efficiency variance,
c Variable overhead rate and efficiency variances. Input all amounts as positive values. Indicate the effect of each variance by selecting F for favorable, U for unfavorable, and "None" for no effect ie zero variance
tableVariable overhead rate variance,,tableVariable overhead efficiencyvariance
Summarize the variances that you computed in above by showing the net overall favorable or unfavorable variance for October. Input all amounts as positive values. Indicate the effect of variance by selecting F for favorable, U for unfavorable, and "None" for no effect ie zero variance
Pick out the two most significant variances that you computed in above. You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.
Materials price variance
Materials quantity variance
Variable overhead efficiency variance
Labor rate variance
Variable overhead rate variance
Labor efficiency variance
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