problem 16

problem 16 - Variable Manufacturing Overhead Efficiency...

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Problem 10-16 1.) a.) (1)Actual Quantity of Input, at actual price 25,000 X $2.95 per pound = $73,750 (2)Actual Quantity of Input at Standard Price 25,000 X $2.50 per pound = $62,500 (3)Standard Quantity allowed for actual input at standard price 20,000 X $2.50 per pound = $50,000 Direct Materials Price Variance = (1)-(2) = $73,750-$62,500 = $11,250 Direct Materials Quantity Variance = (2)-(3) = $62,500 - $50,000 = $12,500 b.) (1)Actual Hours at the Actual Rate = 3,600X$8.70 per hour = $31,320 (2)Actual Hours at Standard Rate = 3,600X$9.00 per hour = $32,400 (3)Standard Hours Allowed for Actual Input at Standard Rate = 3,000X$9.00 = $27,000 Labor Rate Variance = (1)-(2) = $31,320 - $32,400 = $-1080 Labor Efficiency Variance = (2)-(3) = $32,400 - $27,000 = $5400 c.) Variable Manufacturing Overhead Spending Variance = AH(AR-SR) = 1,800(2.00-2.40) = $-720
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Unformatted text preview: Variable Manufacturing Overhead Efficiency Rate = SR(AH-SH) = 2.40(1,800-1,500) = $7,200 2.) net overall variance = $11,250 + $12,500 + $-1080 + $5400 + $-720 + $7,200 = $34,550 This has a negative impact on the income statement because the company is inefficient. If the net overall variance had produced a negative number, the effect would be positive, but this is not the case. 3.) The two most significant variances that I computed in the above question are the direct materials price variance and the direct materials quantity variance because they are the highest positive numbers that are computed. Positive is bad because it means that the company is inefficient. Two possible causes of these high discrepancies are a too-high actual price, or a too-high actual quantity....
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