Direct Material Price Variance and Lbs
PROBLEM ON VARIANCE ANALYSIS
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Submitted to:
PROF. ROSFE CORLAE D. BADUY
Submitted by:
ADRIAN ERWIN M. PEGASON
ERWIN S. FLORES
BETA COMPANY
Beta Company produces two products, A and B, each of which uses materials X and Y. The following unit standard costs apply:
| |Material X |Material Y |Direct Labor |
|Product A |4 lbs @ $15 |1 lb @ $9.50 |1/5 hr @ $18 |
|Product B |6 lbs @ $15 |2 lbs @ $9.50 |1/3 hr @ $18 |
During November 4,200 units of A and 3,600 units of B were produced. Also, 39,000 pounds of X were purchased at $14.40, and 11,000 pounds of Y were purchased at $9.70; all of these materials (but no other materials) were used for the month’s production. This production required 2,025 direct labor-hours at $17.50.
Questions:
1. Calculate the material price variance and usage variances for the month. 2. Calculate the labor rate and efficiency variances for the month. 3. How would your answers to Questions 1 and 2 change if you had been told that November’s planned production activity was 4,000 units of A and 4,000 units of B? 4. How would your answers to question 1 and 2 change if you had been told that November’s sales were 4,000 units of A and 3,500 units of B?
SOLUTIONS:
1. (a.) MATERIAL PRICE AND (b.) USAGE (QUANTITY) VARIANCES
Material X a. = (14.40 – 15) @ 39,000 = 0.60 F @ 39,000 = 23,400 F b. = (39,000 – ((4,200 @ 4 lbs) + (3,600 @ 6 lbs)() @ 15 = (39,000 – 38,400) @ 15 = 600 UF @ 15 = 9,000 UF
Material Y a. = (9.70 – 9.50) @ 11,000 = 0.20 UF @ 11,000 = 2,200 UF b. = (11,000 - ((4,200 @ 1 lbs) +
[pic]
Submitted to:
PROF. ROSFE CORLAE D. BADUY
Submitted by:
ADRIAN ERWIN M. PEGASON
ERWIN S. FLORES
BETA COMPANY
Beta Company produces two products, A and B, each of which uses materials X and Y. The following unit standard costs apply:
| |Material X |Material Y |Direct Labor |
|Product A |4 lbs @ $15 |1 lb @ $9.50 |1/5 hr @ $18 |
|Product B |6 lbs @ $15 |2 lbs @ $9.50 |1/3 hr @ $18 |
During November 4,200 units of A and 3,600 units of B were produced. Also, 39,000 pounds of X were purchased at $14.40, and 11,000 pounds of Y were purchased at $9.70; all of these materials (but no other materials) were used for the month’s production. This production required 2,025 direct labor-hours at $17.50.
Questions:
1. Calculate the material price variance and usage variances for the month. 2. Calculate the labor rate and efficiency variances for the month. 3. How would your answers to Questions 1 and 2 change if you had been told that November’s planned production activity was 4,000 units of A and 4,000 units of B? 4. How would your answers to question 1 and 2 change if you had been told that November’s sales were 4,000 units of A and 3,500 units of B?
SOLUTIONS:
1. (a.) MATERIAL PRICE AND (b.) USAGE (QUANTITY) VARIANCES
Material X a. = (14.40 – 15) @ 39,000 = 0.60 F @ 39,000 = 23,400 F b. = (39,000 – ((4,200 @ 4 lbs) + (3,600 @ 6 lbs)() @ 15 = (39,000 – 38,400) @ 15 = 600 UF @ 15 = 9,000 UF
Material Y a. = (9.70 – 9.50) @ 11,000 = 0.20 UF @ 11,000 = 2,200 UF b. = (11,000 - ((4,200 @ 1 lbs) +