Chapter 10 - online quiz questions with verified answers -York University ADMS 2510

Question 1 Helix Company produces costumes used in the television and movie industries. Recently the company received an ongoing order for Samurai robes to be worn in an upcoming Japanese historical action series made for television. The company uses a standard costing system to assist in the control of costs. According to the standards set for these robes, the factory has a denominator activity level of 1,160 direct labour-hours each month, which should result in the production of 2,900 robes. The standard costs associated with this level of production are as follows: Total Per Unit of Product Direct materials $49,300 $ 17.00 Direct labour $ 9,280 3.20 Variable manufacturing overhead* $ 4,640 1.60 Fixed manufacturing overhead* $ 2,320 0.80 $ 22.60 *Based on direct labour-hours During April, the factory worked only 1,140 direct labour-hours and produced 3,100 robes. The following actual costs were recorded during the month: Total Per Unit of Product Direct materials (6,600 metres) $52,080 $ 16.80 Direct labour $10,540 3.40 Variable manufacturing overhead $ 9,920 3.20 Fixed manufacturing overhead $ 2,170 .70 $ 24.10 At standard, each robe should require 2.0 metres of material. All of the materials purchased during the month were used in production. Required: Compute the following variances for April: 1. The materials price and quantity variances. (Do not round intermediate calculation. Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) 2. The labour rate and efficiency variances. (Do not round intermediate calculation. Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) 3. The variable manufacturing overhead spending and efficiency variances. (Do not round intermediate calculation. Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) 4. The fixed manufacturing overhead budget and volume variances. (Do not round intermediate calculation. Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Explanation: 1. Actual Quantity of Inputs, at Actual Price Actual Quantity of Inputs, at Standard Price Standard Quantity Allowed for Output, at Standard Price (AQ × AP) (AQ × SP) (SQ × SP) $52,080 6,600 metres × $8.50 per metre* 6,200 metres** × $8.50 per metre* = $56,100 = $52,700 Price Variance, -$4,020 F Quantity Variance, $3,400 U Total Variance, -$620 F *$17.00 ÷ 2.0 metres = $8.50 per metre. **3,100 units × 2.0 metres per unit = 6,200 metres Alternative Solution: Materials Price Variance = AQ (AP – SP) 6,600 metres ($7.89 per metre* – $8.50 per metre) = -$4,020 F *$52,080 ÷ 6,600 metres = $7.89 per metre Materials Quantity Variance = SP (AQ – SQ) $8.50 per metre (6,600 metres – 6,200 metres) = $3,400 U 2. Actual Hours of Input, at the Actual Rate Actual Hours of Input, at the Standard Rate Standard Hours Allowed for Output, at the Standard Rate (AH × AR) (AH × SR) (SH × SR) $10,540 1,140 hours × $8 per hour* 1,240 hours** × $8 per hour* = $9,120 = $9,920 Rate Variance, $1,420 U Efficiency Variance, -$800 F Total Variance, $620 U *1,160 standard hours ÷ 2,900 robes = 0.4 standard hour per robe. $3.20 standard cost per robe ÷ 0.4 standard hours = $8 standard rate per hour. Or alternatively $9,280 ÷ 1,160 hours = $8/hr. **3,100 robes × 0.4 standard hour per robe = 1,240 standard hours. Alternative Solution: Labour Rate Variance = AH (AR – SR) 1,140 hours ($9.25 per hour* – $8 per hour) = $1,420 U *$10,540 ÷ 1,140 hours = $9.25 per hour Labour Efficiency Variance = SR (AH – SH) $8 per hour (1,140 hours – 1,240 hours) = -$800 F 3. Actual Hours of Input, at the Actual Rate Actual Hours of Input, at the Standard Rate Standard Hours Allowed for Output, at the Standard Rate (AH × AR) (AH × SR) (SH × SR) $9,920 1,140 hours × $4 per hour* 1,240 hours × $4 per hour* = $4,560 = $4,960 Spending Variance, $5,360 U Efficiency Variance, -$400 F Total Variance, $4,960 U *$1.60 standard cost per robe ÷ 0.4 standard hours = $4 standard rate per hour. Alternative Solution: Variable Overhead Spending Variance = AH (AR – SR) 1,140 hours ($8.70 per hour* – $4 per hour) = $5,360 U *$9,920 ÷ 1,140 hours = $8.70 per hour Variable Overhead Efficiency Variance = SR (AH – SH) $4 per hour (1,140 hours – 1,240 hours) = -$400 F 4. Fixed overhead variances: Actual Fixed Overhead Cost Budgeted Fixed Overhead Cost Fixed Overhead Cost Applied to Work in Process $2,170 $2,320* 1,240 standard DLHs ×$2.00 per DLH = $2,480 Budget Variance, -$150 F Volume Variance, -$160 F *1,160 denominator DLHs × $2 per DLH** = $2,320. Or $2,320 ÷ 1,160 hrs. **$.80 per robe standard cost ÷ 0.4 DLHs per robe = $2 per DLH Alternative approach to the budget and volume variances: Budget Variance: Budget variance = Actual fixed overhead – Flexible budget fixed overhead $2,170 – $2,320 = -$150 F Volume Variance: Fixed Overhead Rate (Denominator hours – standard hours allowed) $2.00 per DLH (1,160 DLHs – 1,240 DLHs) = -$160 F Question 2 The direct materials and direct labour standards for one bottle of Clean-All spray cleaner are given below: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 7.0 millilitres $ 0.31 per millilitre $ 2.17 Direct labour 0.3 hours $ 12.00 per hour $ 3.60 During the most recent month, the following activity was recorded: a. 23,000 millilitres of material was purchased at a cost of $0.26 per millilitre. b. All of the material was used to produce 3,000 bottles of Clean-All. c. 600 hours of direct labour time was recorded at a total labour cost of $7,200. Required: 1. Compute the direct materials price and quantity variances for the month. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) 2. Compute the direct labour rate and efficiency variances for the month. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Explanation: 1. Actual Quantity of Inputs, at Actual Price Actual Quantity of Inputs, at Standard Price Standard Quantity Allowed for Output, at Standard Price (AQ × AP) (AQ × SP) (SQ × SP) 23,000 ml × $0.26 per ml 23,000 ml × $0.31 per ml 21,000 ml* × $0.31 per ml = $5,980 = $7,130 = $6,510 Price Variance, −$1,150 F Quantity Variance, $620 U Total Variance, $530 F *3,000 units × 7 ml per unit = 21,000 ml Alternatively: Materials Price Variance = AQ (AP – SP) 23,000 ml ($0.26 per ml – $0.31 per ml) = –$1,150 F Materials Quantity Variance = SP (AQ – SQ) $0.31 per ml (23,000 ml – 21,000 ml) = $620 U 2. Actual Hours of Input, at the Actual Rate Actual Hours of Input, at the Standard Rate Standard Hours Allowed for Output, at the Standard Rate (AH × AR) (AH × SR) (SH × SR) 600 hours × $12 per hour 900 hours* × $12 per hour $7,200 = $7,200 = $10,800 Rate Variance, $0 Efficiency Variance, $3,600 F Total Variance, $3,600 F *3,000 units ×0.30 hour per unit = 900 hours Alternatively: Labour Rate Variance = AH (AR – SR) 600 hours ($12 per hour* – $12 per hour) = $0