EXAMPLE 1
Acme Brick Company uses the following rule to determine
whether materials usage variances should be investigated:
A materials usage variance will be investigated when the variance
is greater than either $5,000 or 10 percent of the standard cost.
During June, the company purchased 10,000 pounds of concrete
for $5 per pound. It was able to make 20,000 bricks. Its standard
quantity of materials allowed is 0.45 pound of concrete per brick
at a standard price of $6 per pound.
Required:
A.
Determine Acme’s material usage variance and whether it
is favorable or unfavorable.
Actual Input Quantity – SIQA)*SP
10,000 (.45 *20,000)= 1,000 *6= 6,000
B.
Should the variance be investigated?
Chapter 9 Handout
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yes
EXAMPLE 2
Leeds Company uses the following rule to determine whether
labor efficiency variances should be investigated:
A labor efficiency variance will be investigated when the variance
is greater than either $100 or 10 percent of the standard cost.
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 Spring '08
 bortz
 Imperial units, United States customary units, Acme Brick

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