Problem 10-11 Basic Variance Analysis [LO1, LO2, LO3] Please explain how you arrived at your answers
Problem 10-11 Basic Variance Analysis [LO1, LO2, LO3] Please explain how you arrived at your answers | savvyessaywriters.org
Problem 10-11 Basic Variance Analysis [LO1, LO2, LO3]
Please explain how you arrived at your answers as this is very helpful. Thank you
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Barberry, Inc., manufactures a product called Fruta. The company uses a standard cost system and has established the following standards for one unit of Fruta: |
| Standard Quantity | Standard Price or Rate |
Standard Cost | ||||
| Direct materials | 1.3 pounds | $ | 5.80 | per pound | $ | 7.54 |
| Direct labor | 0.8 hours | $ | 12.10 | per hour | 9.68 | |
| Variable manufacturing overhead | 0.8 hours | $ | 2.70 | per hour | 2.16 | |
| $ | 19.38 | |||||
| During June, the company recorded this activity related to production of Fruta: |
| a. |
The company produced 4,200 units during June. |
| b. | A total of 10,180 pounds of material were purchased at a cost of $57,008. |
| c. |
There was no beginning inventory of materials; however, at the end of the month, 2,200 pounds of material remained in ending inventory. |
| d. |
The company employs 10 persons to work on the production of Fruta. During June, they worked an average of 296 hours at an average rate of $12.50 per hour. |
| e. |
Variable manufacturing overhead is assigned to Fruta on the basis of direct labor-hours. Variable manufacturing overhead costs during June totaled $7,400. |
| The company's management is anxious to determine the efficiency of Fruta production activities. |
| Required: |
| 1. | For direct materials: |
| a. |
Compute the price and quantity variances. (Input all amounts as positive values. Do not round intermediate calculations. Leave no cells blank – be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Omit the “$” sign in your response.) |
| Materials price variance | $ | |
| Materials quantity variance | $ | |
| b. |
The materials were purchased from a new supplier who is anxious to enter into a long term purchase contract. Would you recommend that the company sign the contract? |
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| 2. | For labor employed in the production of Fruta: |
| a. |
Compute the rate and efficiency variances. (Input all amounts as positive values. Leave no cells blank – be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Omit the “$” sign in your response.) |
| Labor rate variance | $ | |
| Labor efficiency variance | $ | |
| b. |
In the past, the 10 persons employed in the production of Fruta consisted of 4 senior workers and 6 assistants. During June, the company experimented with 5 senior workers and 5 assistants. Would you recommend that the new labor mix be continued? |
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| 3a. |
Compute the variable overhead rate and efficiency variances. (Input all amounts as positive values. Do not round intermediate calculations. Leave no cells blank – be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Omit the “$” sign in your response.) |
| Variable overhead rate variance | $ | |
| Variable overhead efficiency variance | $ | |
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