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Problem 1118
(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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View Full Document Problem 1118
(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
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This note was uploaded on 06/08/2011 for the course ACTG 213 taught by Professor Lawrence during the Spring '11 term at Portland CC.
 Spring '11
 Lawrence
 Managerial Accounting

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