Question 24: Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as shown by its June contribution format income statement below:

	Budgeted		Actual
Sales (7,000 pools)	$	265,000	$	265,000
Variable expenses:
Variable cost of goods sold*		79,240		97,525
Variable selling expenses		19,000		19,000
Total variable expenses		98,240		116,525
Contribution margin		166,760		148,475
Fixed expenses:
Manufacturing overhead		67,000		67,000
Selling and administrative		85,000		85,000
Total fixed expenses		152,000		152,000
Net operating income (loss)	$	14,760	$	(3,525)

*Contains direct materials, direct labor, and variable manufacturing overhead.

Janet Dunn, who has just been appointed general manager of the Westwood Plant, has been given instructions to get things under control. Upon reviewing the plants income statement, Ms. Dunn has concluded that the major problem lies in the variable cost of goods sold. She has been provided with the following standard cost per swimming pool:

	Standard Quantity or Hours	Standard Price or Rate		Standard Cost
Direct materials	3.5 pounds	$	2.10 per pound	$	7.35
Direct labor	0.4 hours	$	7.60 per hour		3.04
Variable manufacturing overhead	0.3 hours*	$	3.10 per hour		0.93
Total standard cost				$	11.32

*Based on machine-hours.

During June the plant produced 7,000 pools and incurred the following costs:

a.	Purchased 29,500 pounds of materials at a cost of $2.55 per pound.
b.	Used 24,300 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)
c.	Worked 3,400 direct labor-hours at a cost of $7.30 per hour.
d.	Incurred variable manufacturing overhead cost totaling $8,400 for the month. A total of 2,400 machine-hours was recorded.

It is the companys policy to close all variances to cost of goods sold on a monthly basis.

Required:

1.	Compute the following variances for June:

a.	Materials price and quantity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

b.	Labor rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

c.	Variable overhead rate and efficiency variances. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

2.	Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month. (Input all values as positive amounts. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

3.

Pick out the two most significant variances that you computed in (1) above. (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)

Question 25:

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 $2.00 per foot					$	3.50
Direct labor:
Standard: 0.90 hours at $14.00 per hour		12.60
Actual: 0.95 hours at $13.40 per hour						12.73
Variable overhead:
Standard: 0.90 hours at $4.00 per hour		3.60
Actual: 0.95 hours at $3.60 per hour						3.42
Total cost per unit	$	19.44			$	19.65
Excess of actual cost over standard cost per unit			$	0.21

The production superintendent was pleased when he saw this report and commented: This $0.21 excess cost is well within the 2 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 11,000 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.	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 (i.e, zero variance).)

b.	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 (i.e, zero 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 (i.e, zero variance).)

2.	How much of the $0.21 excess unit cost is traceable to each of the variances computed in (1) above. (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 (i.e., zero variance). Round your answers to 2 decimal places.)

3.

How much of the $0.21 excess unit cost is traceable to apparent inefficient use of labor time? (Input all values as positive amounts. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round intermediate calculations. Round your final answers to 2 decimal places.)

Question 26:

Marvel Parts, Inc., manufactures auto accessories. One of the companys products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,065 hours each month to produce 2,130 sets of covers. The standard costs associated with this level of production are:

	Total		Per Set of Covers
Direct materials	$	35,358	$	16.60
Direct labor	$	8,520		4.00
Variable manufacturing overhead (based on direct labor-hours)	$	3,195		1.50
			$	22.10

During August, the factory worked only 1,050 direct labor-hours and produced 2,700 sets of covers. The following actual costs were recorded during the month:

	Total		Per Set of Covers
Direct materials (6,000 yards)	$	43,740	$	16.20
Direct labor	$	11,340		4.20
Variable manufacturing overhead	$	5,670		2.10
			$	22.50

At standard, each set of covers should require 2.00 yards of material. All of the materials purchased during the month were used in production.

Required:

1.	Compute the materials price and quantity variances for August. (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 (i.e, zero variance).)

2.	Compute the labor rate and efficiency variances for August. (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 (i.e, zero variance).)

3.

Compute the variable overhead rate and efficiency variances for August. (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 (i.e, zero variance).)

Question 27:

DataSpan, Inc., automated its plant at the start of the current year and installed a flexible manufacturing system. The company is also evaluating its suppliers and moving toward Lean Production. Many adjustment problems have been encountered, including problems relating to performance measurement. After much study, the company has decided to use the performance measures below, and it has gathered data relating to these measures for the first four months of operations.

	Month
	1	2	3	4
Throughput time (days)	?	?	?	?
Delivery cycle time (days)	?	?	?	?
Manufacturing cycle efficiency (MCE)	?	?	?	?
Percentage of on-time deliveries	76%	77%	82%	89%
Total sales (units)	10,470	10,550	10,480	10,550

Management has asked for your help in computing throughput time, delivery cycle time, and MCE. The following average times have been logged over the last four months:

	Average per Month (in days)
	1		2		3		4
Move time per unit	0.7		0.5		0.7		0.4
Process time per unit	0.4		0.4		0.3		0.6
Wait time per order before start of production	9.7		8.0		5.0		4.0
Queue time per unit	3.4		3.6		2.3		1.5
Inspection time per unit	0.7		0.6		0.4		0.4

Required:
1-a.	Compute the throughput time for each month. (Round your answers to 1 decimal place.)

1-b.	Compute the manufacturing cycle efficiency (MCE) for each month. (Round your answers to 1 decimal place (i.e., 0.123 should be entered as 12.3).)

1-c.	Compute the delivery cycle time for each month. (Round your answers to 1 decimal place.)

3-a.

Refer to the move time, process time, and so forth, given for month 4. Assume that in month 5 the move time, process time, and so forth, are the same as in month 4, except that through the use of Lean Production the company is able to completely eliminate the queue time during production. Compute the new throughput time and MCE. (Round your Throughput Time to 1 decimal place. Round your MCE percentage answer to 1 decimal place (i.e., 0.123 should be entered as 12.3).)

3-b.

Refer to the move time, process time, and so forth, given for month 4. Assume in month 6 that the move time, process time, and so forth, are again the same as in month 4, except that the company is able to completely eliminate both the queue time during production and the inspection time. Compute the new throughput time and MCE. (Round your Throughput Time to 1 decimal place. Round your MCE percentage answer to 1 decimal place (i.e., 0.123 should be entered as 12.3).)