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The management of the Hampshire Company would like to implement benchmarking. Standard costs have been established and are presented below. You will want to complete

The management of the Hampshire Company would like to implement benchmarking. Standard costs have been established and are presented below. You will want to complete a variance analysis to include efficiency and price variances for materials (cloth and handle assemblies) and labor based on the following data:

Units Produced = 80,000

Units Sold = 60,000

Direct Materials Purchased and Used

Actual yards of cloth purchased and used: 128,000

Actual price incurred per yard: $1.25

Actual handles purchased and used: 80,808

Actual price per handle/rib/stretcher assembly: $0.99

Direct Manufacturing Labor Used

Actual direct labor hours used: 15,748

Actual price per hour: $7.62

Direct labor costs: $120,000

Standard Rates

Standard labor hours per unit: 0.20

Standard labor price per hour: $7.50

Yards material per unit: 1.50

Standard price per yard: $1.15

Handle/rib/stretcher assembly per unit: 1

Standard price per handle assembly: $1.05

Companies can use variance analysis and benchmarking to measure performance within their own company and against competitors. This can be done by setting standards/budgets and comparing a completed variance analysis to results from prior periods or comparing them to competitors results. Using the information provided above, complete the following calculations (steps 1 and 2) in the Hampshire Company Spreadsheet. This will assist you in responding to all components of Section III.

  1. Calculate price variances for material and labor and denote whether they are favorable or unfavorable.
  2. Calculate efficiency variances for material and labor and denote whether they are favorable or unfavorable.
Price Variances:
(Actual Price Standard Price) X Actual Quantity
Actual Standard Actual Quantity Variance Favorable or Unfavorable
Cloth $ $ X $
Handle Assembly $ $ X $
Labor Price Variance $ $ X $
Requirement 2
Efficiency Variances:
(Actual Quantity of Input Used Standard Quantity of Input Allowed for Actual Output) X Budgeted Price of Input
Actual Standard Standard Price Variance Favorable or Unfavorable
Cloth X X $ $
(1.5 Yards per Unit)
Handle Assembly X X $ $
(1 per Unit)
Labor X X $ $
(.20 per Unit)

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