Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Phono Company manufactures a plastic toy cell phone. The following standards have been established for the toys materials and labor inputs: Standard Quantity Standard Price

Phono Company manufactures a plastic toy cell phone. The following standards have been established for the toys materials and labor inputs:
Standard
Quantity Standard Price
(rate in $) Standard
Cost
Direct materials 0.5 lb. $ 1.50 $0.75
Direct labor 0.15 hr. 10.00 1.50
During the first week of July, the company had the following results:
Units produced 90,000
Actual labor costs $138,000
Actual labor hours 13,400
Materials purchased and used 44,250 lbs. @ $1.55 per lb
The purchasing agent located a new source of slightly higher-quality plastic, and this material was used during the first week in July. Also, a new manufacturing layout was implemented on a trial basis. The new layout required a slightly higher level of skilled labor. The higher-quality material has no effect on labor utilization. Similarly, the new manufacturing approach has no effect on material usage. (Note: Round all variances to the nearest dollar.)
Required:
1. Conceptual Connection: Compute the materials price and usage variances.
Materials price variance $
Unfavorable
Materials usage variance $
Favorable
Assuming that the materials variances are essentially attributable to the higher quality of materials, would you recommend that the purchasing agent continue to buy this quality, or should the usual quality be purchased? Assume that the quality of the end product is not affected significantly.
Go back to the prior quality.
2. Conceptual Connection: Compute the labor rate and efficiency variances.
Labor rate variance $
Unfavorable
Labor efficiency variance $
Favorable
Assuming that the labor variances are attributable to the new manufacturing layout, should it be continued or discontinued?
Discontinued
3. Conceptual Connection: Refer to Requirement 2. Suppose that the industrial engineer argued that the new layout should not be evaluated after only one week. His reasoning was that it would take at least a week for the workers to become efficient with the new approach. Suppose that the production is the same the second week and that the actual labor hours were 13,200 and the labor cost was $132,000. If there is no variance, enter "0" and select "No variance" from the dropdown.
Labor rate variance $
No variance
Labor efficiency variance $
Favorable
Should the new layout be adopted? Assume the variances are attributable to the new layout.
Yes
If so, what would be the projected annual savings?
$

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

New Principles Of Best Practice In Clinical Audit

Authors: Robin Burgess

2nd Edition

1138443646, 978-1138443648

More Books

Students also viewed these Accounting questions

Question

8-6 Who poses the biggest security threat: insiders or outsiders?

Answered: 1 week ago