Question
Question Content Area Direct Materials Variances Alvarado Company produces a product that requires 2.3 standard pounds per unit. The standard price is $3.60 per pound.
Question Content Area
Direct Materials Variances
Alvarado Company produces a product that requires 2.3 standard pounds per unit. The standard price is $3.60 per pound. 16,000 units used 35,500 pounds, which were purchased at $3.80 per pound.
This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.
Open spreadsheet
What is the direct materials (a) price variance, (b) quantity variance, and (c) cost variance? Round your answers to the nearest dollar. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Line Item Description | Amount | Variance |
---|---|---|
a. Direct materials price variance | $fill in the blank 2 | FavorableUnfavorable |
b. Direct materials quantity variance | $fill in the blank 4 | FavorableUnfavorable |
c. Direct materials cost variance | $fill in the blank 6 | FavorableUnfavorable |
PART 2
Direct labor variances
Alvarado Company produces a product that requires 3 standard direct labor hours per unit at a standard hourly rate of $20.00 per hour. 15,700 units used 64,400 hours at an hourly rate of $19.05 per hour.
This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.
Open spreadsheet
What is the direct labor (a) rate variance, (b) time variance, and (c) cost variance? Round your answers to the nearest dollar. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Line Item Description | Amount | Variance |
---|---|---|
a. Direct labor rate variance | $fill in the blank 2 | FavorableUnfavorable |
b. Direct labor time variance | $fill in the blank 4 | FavorableUnfavorable |
c. Direct labor cost variance | $fill in the blank 6 | FavorableUnfavorable |
PART 3
Factory Overhead Controllable Variance
Alvarado Company produced 15,000 units of product that required 4 standard direct labor hours per unit. The standard variable overhead cost per unit is $0.90 per direct labor hour. The actual variable factory overhead was $50,760.
This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the question below.
Open spreadsheet
Determine the variable factory overhead controllable variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. fill in the blank 1 of 2$ fill in the blank 2 of 2
FavorableUnfavorable
PART 4
Part A:
Note: You must complete part A before completing parts B and C.
Genuine Spice Inc. began operations on January 1 of the current year. The company produces 8-ounce bottles of hand and body lotion called Eternal Beauty. The lotion is sold wholesale in 12-bottle cases for $100 per case. There is a selling commission of $20 per case. The January direct materials, direct labor, and factory overhead costs are as follows:
Products | Cost Behavior | Units per Case | Cost per Unit | Direct Materials Cost per Case |
---|---|---|---|---|
Cream base | Variable | 100 ozs. | $0.02 | $2.00 |
Natural oils | Variable | 30 ozs. | 0.30 | 9.00 |
Bottle (8-oz.) | Variable | 12 bottles | 0.50 | 6.00 |
Total direct materials cost per case | $17.00 |
Department | Cost Behavior | Time per Case | Labor Rate per Hour | Direct Labor Cost per Case |
---|---|---|---|---|
Mixing | Variable | 20 min. | $18.00 | $6.00 |
Filling | Variable | 5 min. | 14.40 | 1.20 |
Total direct labor cost per case | 25 min. | $7.20 |
Line Item Description | Cost Behavior | Total Cost | |
---|---|---|---|
Utilities | Mixed | $600 | |
Facility lease | Fixed | 14,000 | |
Equipment depreciation | Fixed | 4,300 | |
Supplies | Fixed | 660 | |
Total cost | $19,560 |
Part ABreak-Even Analysis
The management of Genuine Spice Inc. wishes to determine the number of cases required to break even per month. The utilities cost, which is part of factory overhead, is a mixed cost. The following information was gathered from the first six months of operation regarding this cost:
Month | Case Production | Utility Total Cost |
---|---|---|
January | 500 | $600 |
February | 800 | 660 |
March | 1,200 | 740 |
April | 1,100 | 720 |
May | 950 | 690 |
June | 1,025 | 705 |
Required:
1. Determine the fixed and variable portions of the utility cost using the high-low method. Round the per unit cost to the nearest cent.
Line Item Description | At the High Point | At the Low Point |
---|---|---|
Variable cost per unit | $fill in the blank 1 | $fill in the blank 2 |
Total fixed cost | fill in the blank 3 | fill in the blank 4 |
Total cost | fill in the blank 5 | fill in the blank 6 |
2. Determine the contribution margin per case. Round your answer to the nearest cent. Contribution margin per case fill in the blank 1 of 1$
3. Determine the fixed costs per month, including the utility fixed cost from part (1).
Line Item Description | Fixed Costs per Month |
---|---|
Utilities cost (from part 1) | $fill in the blank 8 |
Facility lease | fill in the blank 9 |
Equipment depreciation | fill in the blank 10 |
Supplies | fill in the blank 11 |
Total fixed costs | $fill in the blank 12 |
4. Determine the break-even number of cases per month. fill in the blank 1 of 1$ cases
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