{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Solution to topic 7 tutorial

Solution to topic 7 tutorial - S IOLUT IO N TO TOP IC 7 T U...

Info icon This preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
SIOLUTION TO TOPIC 7 TUTORIAL TOPIC: Cost performance and reviews 10-11 The direct-material price variance is based on the quantity purchased (PQ). Deviations between the actual and standard price, which are highlighted by the price variance, relate to the purchasing function in the firm. Timely action to follow up a significant price variance is facilitated by calculating this variance as soon as possible after the material is purchased. The direct-material quantity variance is based on the amount of material used in production (AQ). The quantity variance highlights deviations between the quantity of material actually used (AQ) and the standard quantity allowed (SQ). Therefore, it makes sense to compute this variance at the time the material is used in production. 10-35 Direct Material Direct Labor Standard price or rate per unit of input... $16 per lb $20 per hr e Standard quantity per unit of output ....... 2.75 lbs per unit c 4 hrs per unit f Actual quantity used per unit of output... 3 lbs per unit a 3.5 hrs Actual price or rate per unit of input ....... $14 per lb $21 per hr Actual output ......................................... 20,000 units 20,000 units Direct-material price variance ................. $120,000 F Direct-material quantity variance ............ $80,000 U b Total of direct-material variances ............ $40,000 F Direct-labor rate variance ....................... $ 70,000 U d Direct-labor efficiency variance ............... $200,000 F Total of direct-labor variances ................. $130,000 F
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Explanatory notes: a. Direct-material price variance = PQ(AP – SP) $120,000 F = PQ($14 – $16) PQ = 60,000 lbs Actual quantity used = quantity purchased AQ = PQ = 60,000 lbs Actual quantity per unit of output = b. Total direct-material variance = price variance + quantity variance
Image of page 2
$40,000 F = $120,000 F + quantity variance Quantity variance = $80,000 U c. Direct-material quantity variance = SP(AQ – SQ) $80,000 U = $16(60,000 – SQ) SQ = 55,000 lbs Standard quantity per unit = d. Total direct-labor variance = rate variance + efficiency variance $130,000 F = rate variance + $200,000 F Rate variance = $70,000 U e. AH = 20,000 units × 3.5 hrs per unit = 70,000 hrs Direct-labor rate variance = AH(AR – SR) $70,000 U = 70,000($21 – SR) SR = $20 f. Direct-labor efficiency variance = SR(AH – SH) $200,000 F = $20 (70,000 – SH) SH = 80,000 hrs Standard hrs per unit = 80,000 hrs/20,000 units = 4 hrs per unit 10-46
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
1. Type I fertilizer: Price variance: Actual quantity purchased x actual price 5,000 pounds x $ . 53……………………………… $2,650 Actual quantity purchased x standard price 5,000 pounds x $ . 50……………………………… 2,500 Direct-material price variance………………………. $ 150 Unfavorable Quantity variance: Actual quantity used x standard price 3,700 pounds x $ .
Image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern