CH_21_Solutions

CH_21_Solutions - CH 21 Solutions Ch 21: Q1, 4, 6; E21-2,...

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CH 21 Solutions Ch 21: Q1, 4, 6; E21-2, 21-4, 21-12, 21-14; PT REQUIRED E21-8, P21-2B; EXTRA CREDIT P21-3A (5 pts) 1. Standard costs assist management in controlling costs and in motivating employees to focus on costs. 4. There is no set time period for the revision of standards. They should be revised when prices, product design, labor rates, and manufacturing methods change to such an extent that current standards no longer represent a useful measure of performance. 6. a. The two variances in direct materials cost are: (1) Price (2) Quantity or usage b. The price variance is the result of a difference between the actual price and the standard price. It may be caused by such factors as a change in market prices or inefficient purchasing procedures. The quantity or usage variance results from using more or less materials than the standard quantity. It can be caused by such factors as excessive spoilage, carelessness in the production processes, and the use of inferior materials. Ex. 21–2 Direct labor. ....................................................... $15.00 × 3.5 hours $ 52.50 Direct materials. ................................................ $7.50 × 20 board ft. 150.00 Variable factory overhead. .............................. $2.20 × 3.5 hours 7.70 Fixed factory overhead. ................................... $0.80 × 3.5 hours 2.80 Total cost per unit. ...................................... $213.00 Ex. 21–4 a. Price variance: Actual price. ...................................... $ 1.85 per pound Standard price. ................................. 2 .00 per pound Variance—favorable. .................. $(0.15) per pound × actual quantity, 128,500 $(19,275) Quantity variance: Actual quantity. ................................ 128,500 pounds Standard quantity. ............................ 126,750 pounds Variance—unfavorable. .............. 1,750 pounds × standard price, $2.00 3,500
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Total direct materials cost variance—favorable. ...................................... $ (15,775 ) b. The direct materials price variance should normally be reported to the Purchasing Department, which may or may not be able to control this variance. If materials of the same quality were purchased from another supplier at a price lower than the standard price, the variance was controllable. On the other hand, if the variance resulted from a marketwide
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This note was uploaded on 05/04/2008 for the course BUAD 495 taught by Professor Mamun,todd during the Spring '07 term at USC.

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CH_21_Solutions - CH 21 Solutions Ch 21: Q1, 4, 6; E21-2,...

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