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Solution to P11-18 Garrison 13e

# Solution to P11-18 Garrison 13e - Problem 11-18(45 minutes...

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Problem 11-18 (45 minutes) This problem is more difficult than it looks. Allow ample time for discussion. 1. Actual Quantity of Input, at Actual Price Actual Quantity of Input, at Standard Price Standard Quantity Allowed for Output, at Standard Price (AQ × AP) (AQ × SP) (SQ × SP) 12,000 yards × \$4.00 per yard* 11,200 yards** × \$4.00 per yard* \$45,600 = \$48,000 = \$44,800 Price Variance, \$2,400 F Quantity Variance, \$3,200 U Total Variance, \$800 U * \$22.40 ÷ 5.6 yards = \$4.00 per yard ** 2,000 sets × 5.6 yards per set = 11,200 yards Alternatively, the variances can be computed using the formulas: Materials price variance = AQ (AP SP) 12,000 yards (\$3.80 per yard* \$4.00 per yard) = \$2,400 F *\$45,600 ÷ 12,000 yards = \$3.80 per yard Materials quantity variance = SP (AQ SQ) \$4.00 per yard (12,000 yards 11,200 yards) = \$3,200 U

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Problem 11-18 (continued) 2. Many students will miss parts 2 and 3 because they will try to use product costs as if they were hourly costs. Pay particular attention to the computation of the standard direct labor time per unit and the standard direct labor rate per hour.
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