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3.6 apr%2029%20egs%20solns

# 3.6 apr%2029%20egs%20solns - University of Canterbury...

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University of Canterbury Department of Accounting and Information Systems ACIS222 Solutions to Standard Costing Questions Example 2: Eastern Company 1. Material usage variance = \$ 400 U 800 x 5 @ \$2 + 800 x 3 @ \$3 = \$ 15 200 3 900 @ \$2 + 2 600 @ \$3 = \$ 15 600 Usage Variance = \$ 400 U Material price variance (purchases) = \$280 U 5 000 @ \$2 + 2 800 @ \$3 = \$ 18 400 5 000 @ \$2 + 2800 @ \$3.10 = \$ 18 680 Price Variance = \$ 280 U 2. Labour efficiency variance = \$1 400 U Labour price variance = \$ 280 U 800 x 4 @ \$7 = \$ 22 400 3 400 @ \$7 = \$ 23 800 2 000 @ \$7 + 1 400 @ \$7.20 = \$ 24 080 Efficiency Variance = \$ 1 400 U Rate Variance = \$ 280 U Total Variance = \$ 1 680 U 3. The person who does the purchasing is responsible for direct materials price variances. If this variance is calculated on the basis of units used rather than those purchased, the results of his or her performance are distorted. If the materials price variance is recorded at the time of purchase, the performance of the purchasing agent for the period is reflected in the variance. Also, the purchasing agent can take quick corrective action if the variance is unfavourable.

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4. Variable overhead efficiency variance = \$ 600 U
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