V 0 X its itslearning X https://centria.itslearning.com/Cu x https://centria.itslearning.com/CL x + ^ centria.itslearning.com/CustomActivity/Proxy/MediaPreviewHandler.ashx?CustomActivityld= 104316&Childld=0&fileRepold=rjhaXa4E46jndLKG%... [ * 0 . .. 4 15 + 60 % > > Exercise-3 Labor and variable overhead variances Universal Electronics Inc., manufactures a voice recording device. The following information has been obtained from direct labor standards that the company has set for this device. Standard time to complete one unit: 24 minutes Standard direct labor rate: $12 per hour During the month of June, 8,500 hours were worked and 20,000 units were manufactured. The actual direct labor and variable manufacturing overhead costs incurred for the month of June were as follows: Direct labor cost: $98,600 Variable manufacturing overhead cost: $78,200 The budgeted variable manufacturing overhead rate of Universal Electronics Inc., was $8. Required: Compute labor rate variance and labor efficiency variance for June. 2. Compute variable overhead spending and efficiency variances for June. Exercise-4 Materials price and quantity variance; labor rate and efficiency variance P&G company produces large size bags for the use of tourists. Company uses standard costing system to control costs. The standards for materials and labor costs to manufacture 1 bag are as follows: Direct materials: 7.2 lbs. @ $5 per lb. Direct labor: 0.4 hours @ $20 per hour e last month, P&G produced 2,500 large bags. 20,000 lbs. of direct materials were purchased @ $4.8 per lb. There was no direct materials inventory at the beginning and at the end of the month. 900 direct labor hours were recorded @ $24 per hour. Required: Compute direct materials price and quantity variance. 2. Compute direct labor rate and efficiency variance 16 . C L ENG 16.05 Puolipilvista FI 06/05/2022 2V 0 X its itslearning X https://centria.itslearning.com/Cu x https://centria.itslearning.com/CL x + - C centria.itslearning.com/CustomActivity/Proxy/MediaPreviewHandler.ashx?CustomActivityld=104316&Childld=0&fileRepold=rjhaXa4E4E6jndLKG%... [ * * 0 . .. 5 15 + 60 % > > Exercise-5 Working backward from materials and labor variances ABC company manufactures and sells product X. The standards for materials and labor costs to manufacture one unit of product X are as follows: Direct materials: 6lbs. @ $2 per lb Direct labor: 1 hour @ $8 per hour ABC company purchased 26,000 pounds of direct materials for $27,300 and manufactured 4,000 units of product x during January 2012. The following variances data belong to the January 2012: Materials price variance: $2,600 Unfavorable . Materials quantity variance: $2,000 Unfavorable Direct labor rate variance: $1,520 Unfavorable . Direct labor efficiency variance: $1,600 Favorable Required: 1. Compute standard quantity of direct materials allowed (in pounds) for January production. 2. Compute the actual quantity of materials used (in pounds) for January production. 3. Compute the standard direct labor hours allowed for January production. 4. Compute actual direct labor hours worked for January production 5. Compute actual direct labor rate. 16 . C ENG Puolipilvista B L 16.05 FI 06/05/2022 2V 0 X its itslearning X https://centria.itslearning. x https://centria.itslearning x Course Hero X Dashboard X + - C centria.itslearning.com/CustomActivity/Proxy/MediaPreviewHandler.ashx?CustomActivityld=104316&Childld=0&fileRepold=rjhaXa4E4E6jndLKG%... 0 . .. 1 15 + 60% > > Standard Costing and Variance Analysis Formulas: Direct Materials Variances: Materials purchase price variance Formula Materials purchase price variance = (Actual quantity purchased x Actual price) - (Actual quantity purchased x Standard price) Materials price usage variance formula terials price usage variance = (Actual quantity used x Actual price) - (Actual quantity used x S Materials quantity/usage variance formula Materials price usage variance = (Actual quantity used x Standard price) - (Standard quantity allowed x Standard price) Materials mix variance formula (Actual quantities at individual standard materials costs) - (Actual quantities at weighted average of standard materials costs) Materials yield variance formula (Actual quantities at weighted average of standard materials costs) - (Actual output quantity at standard materials cost Direct Labor Variances Direct labor rate/price variance formula (Actual hours worked x Actual rate) - (Actual hours worked x Standard rate) Direct labor efficiency/usage/quantity formula (Actual hours worked x Standard rate) - (Standard hours allowed x Standard rate) Direct labor yield variance formula (Standard hours allowed for expected output x Standard labor rate) - (Standard hours allowed for actual output x Standard labor rate) 16 . C L ENG 16.11 Puolipilvista FI 06/05/2022V 0 X its itslearning X https://centria.itslearning. x https://centria.itslearning x * Course Hero X Dashboard X + - C centria.itslearning.com/CustomActivity/Proxy/MediaPreviewHandler.ashx?CustomActivityld= 104316&Childld=0&fileRepold=rjhaXa4E4E6jndLKG%... 0 . .. 2 15 + 60 % > > Factory Overhead Variances Factory overhead controllable variance formula (Actual factory overhead) - (Budgeted allowance based on standard hours allowed*) Factory overhead volume variance (Budgeted allowance based on standard hours allowed*) - (Factory overhead applied or charged to production**) Factory overhead spending variance (Actual factory overhead) - (Budgeted allowance based on actual hours worked**) Factory overhead idle capacity variance formula (Budgeted allowance based on actual hours worked***) - (Actual hours worked x Standard overhead rate) Factory overhead efficiency variance formula (Actual hours worked x Standard overhead rate) - (Standard hours allowed for expected output x Standard overhead rate) Variable overhead efficiency variance formula (Actual hours worked x Standard variable overhead rate) - (Standard hours allowed x Standard variable overhead rate) Variable overhead efficiency variance formula (Actual hours worked x Fixed overhead rate) - (Standard hours allowed x Fixed overhead rate) Factory overhead yield variance formula (Standard hours allowed for expected output x Standard overhead rate) - (Standard hours allowed for actual output x Standard overhead rate) * Fixed overhead budgeted + Standard hours allowed x Standard variable overhead rate **Standard hours allowed for actual production x Standard overhead rate ***Fixed overhead budgeted + Actual hours worked x Standard variable overhead 16 . C L ENG 16.12 Puolipilvista FI 06/05/2022V 0 X its itslearning X https://centria.itslearning.com/CL x https://centria.itslearning.com/CL x + A centria.itslearning.com/CustomActivity/Proxy/MediaPreviewHandler.ashx?CustomActivityld= 104316&Childld=0&fileRepold=rjhaXa4E4E6jndLKG%... [ * 0 . .. 3 15 - 1 + 60 % > > EXERCISES Exercise-1 Computation of materials price and quantity variance Delta Woods Inc., manufactures wood products for the use in small and medium size offices. One of its products is a chair. Last month Delta manufactured 4,000 chairs for which company purchased and used 11,000 feet of wood. The total cost of 11,000 feet of wood was $37,400. According to direct materials price and quantity standards, one chair requires 2.5 feet of wood at a cost of $3.60. Required: 1. Compute the standard cost of wood needed to manufacture 4,000 chairs. Compute direct materials price and quantity variance for the last month. Exercise-2 Materials and labor variance, causes of variances Alpha Sports Company manufactures high quality sports products. Products are sold in the local as well as international markets. The company uses a well established standard costing system to control costs. One of the products of Alpha Supports Company is a cricket bat. The standard requirements to manufacture one bat are as follows: Direct materials: 5 feet wood @ $0.60 per foot Direct labor: 1.2 hours @ $14 per hour During the last month, Alpha manufactured 4,000 cricket bats. 50,000 feet wood was purchased @ 0.56 per foot. 20,000 feet wood was in stock at the end of the month. 6,400 direct labor hours were worked @ $15 per hour. Required: 1. Compute direct materials price and quantity variances. 2. Compute direct labor rate and efficiency variances 3. Explain the significance and possible causes of each variance. 16 . C Puolipilvista L ENG 16.04 FI 06/05/2022