Direct costs standard prices standard input allowed

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Applied Calculus for the Managerial, Life, and Social Sciences
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Chapter 2 / Exercise 61
Applied Calculus for the Managerial, Life, and Social Sciences
Tan
Expert Verified
Direct CostsStandard price(s) × Standard inputallowed for actual outputs achievedActual price(s)× Actual input These journal entries differ from the normal costingentries because Work-in-Process Control isno longer carried at “actual” costs. Furthermore, Direct Materials Control is carried at standardunit prices rather than actual unit prices. Finally, variances appear for direct materials and directmanufacturing labor under standard costingbut not under normal costing
.7-32Price and efficiency variances, benchmarking.Nantucket Enterprises manufactures in-sulated cold beverage cups printed with college and corporate logos, which it distributes nationallyin lots of 12 dozen cups. In June 2017, Nantucket produced 5,000 lots of its most popular line ofcups, the 24-ounce lidded tumbler, at each of its two plants, which are located in Providence andAmherst. The production manager, Shannon Bryant, asks her assistant, Joel Hudson, to find out theprecise per-unit budgeted variable costs at the two plants and the variable costs of a competitor,Beverage Mate, who offers similar-quality tumblers at cheaper prices. Hudson pulls together the fol-lowing information for each lot:Per lotProvidence PlantAmherst PlantBeverage MateDirect materials74 lbs. @ $3.20 per lb.76.5 lbs. @ $3.10 perlb.70 lbs. @ $2.90 per lb.Direct manufacturing labor2.5 hrs. @ $12.00 perhr.2.4 hrs. @ $12.20 perhr.2.4 hrs. @ $10.50 per hr.Variable overhead$20 per lot$22 per lot$20 per lotRequired:1.What is the budgeted variable cost per lot at the Providence Plant, the Amherst Plant, and atBeverage Mate?2.Using the Beverage Mate data as the standard, calculate the direct materials and direct manu-facturing labor price and efficiency variances for the Providence and Amherst plants.3.What advantage does Nantucket get by using Beverage Mate’s benchmark data as standardsin calculating its variances? Identify two issues that Bryant should keep in mind in using theBeverage Mate data as the standards.SOLUTION(25 min.)Price and efficiency variances, benchmarking.
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Applied Calculus for the Managerial, Life, and Social Sciences
The document you are viewing contains questions related to this textbook.
Chapter 2 / Exercise 61
Applied Calculus for the Managerial, Life, and Social Sciences
Tan
Expert Verified
1.Providence PlantPrices and quantitiesCost per lotDirect materials74.0lbs@$ 3.20per lb$236.80Direct labor2.5hrs@$12.00per hr30.00Variable overhead 20.00Budgeted variable cost$286.80Amherst PlantPrices and quantitiesCost per lotDirect materials76.50lbs@$ 3.10per lb$237.15Direct labor2.4hrs@$12.20per hr29.28Variable overhead22.00Budgeted variable cost$288.43Beverage MatePrices and quantitiesCost per lotDirect materials70.00lbs@$ 2.90per lb$203.00Direct labor2.4hrs@$10.50per hr25.20Variable overhead20.00Budgeted variable cost$248.202.Providence PlantActualQuantity ActualPriceBudgeted Efficiency ResultsVariancePriceVariance(1)(2) = (1) – (3)(4) = (3) – (5)(5)Lots5,0005,000Direct materials$1,184,000$111,000 U$1,073,000b$58,000 U $1,015,000Direct labor$ 150,000$ 18,750 U$ 131,250c$5,250 U $ 126,000a Using Beverage Mate’s prices and quantities as the standard: Direct materials: (70 lbs./lot 5,000 lots) $2.90/lb. = $1,015,000Direct labor: (2.4 hrs./lot 5,000 lots) $10.50/hr. = $126,000b (74.0 lbs./lot 5,000 lots) $2.90 per lb. = $1,073,000c (2.5 hours/lot 5,000 lots) $10.50/hr. = $131,250
Amherst PlantActualQuantity ActualPriceBudgeted Efficiency FlexibleResultsVariancePriceVarianceBudgeta(1)(2) = (1) – (3)(4) = (3) – (5)(5)Lots      5,000      5,000Direct Materials$1,185,750$76,500 U$1,109,250b$8,800 U $1,015,000

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