Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 23: Q6SE (page 1307)

Martin, Inc. is a manufacturer of lead crystal glasses. The standard direct materialsquantity is 1.0 pound per glass at a cost of \(0.50 per pound. The actual result for onemonth’s production of 6,500 glasses was 1.2 pounds per glass, at a cost of \)0.30 perpound. Calculate the direct materials cost variance and the direct materials efficiencyvariance.

Short Answer

Expert verified

The direct material cost variance of the company is $1,560(F) and the direct materials efficiency variance of the company is $650(U).

Step by step solution

01

Computation of the direct materials cost variance-

Direct materials cost variance

Actal quantity [6,500 x 1.2] (a)

$7,800

Actual price (b)

$0.30

Standard price (c)

$0.50

Direct materials cost variance [a*(b-c)]

$1,560 (F)

02

Computation of the direct materials efficiency variance-

Direct materials efficiency variance

Standard price (a)

$0.50

Actual quantity [6,500 x1.2] (b)

$7,800

Standard quantity [6,500 x1.0] (c)

$6,500

Direct materials efficiency variance [a*(b-c)]

$650 (U)

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Calculating flexible budget variances

Complete the flexible budget variance analysis by filling in the blanks in the partialflexible budget performance report for 9,000 travel locks for Grant, Inc.

GRANT, INC.

Flexible Budget Performance Report (partial)

For the Month Ended April 30, 2018


ActualResults
Flexible Budget Variance
Flexible Budget

Units
9,000
(a)
9,000

Sales Revenue

\(126,000

(b)

(c)

\)108,000

Variable Costs

\(52,300

(d)

(e)

\)50,300

Contribution Margin

\(73,700

(f)

(g)

\)57,700

Fixed Costs

\(16,100

(h)

(i)

\)14,900

Operating Income

\(57,600

(j)

(k)

\)42,800

Question:List the direct materials variances, and briefly describe each.

Understanding variance relationships

Complete the table below for the missing variances.

Total Flexible Budget Product Cost Variance

(a)

Total direct material variance

(b)

Total direct labor variance

(c)

Total Manufacturing Overhead Variance

(d)

Direct material cost variance

Direct material efficiency variance

Direct Labor Cost Variance

Direct Labor Efficiency Variance

Total Variable Overhead Variance

Total fixed overhead variance

\(310F

\)165U

\(160U

\)415F

(e)

(f)

Variable Overhead Cost Variance

Variable Overhead Efficiency Variance

Fixed Overhead Cost Variance

\(525U

\)575F

$50F

Computing and journalizing standard cost variances

Moss manufactures coffee mugs that it sells to other companies for customizing with their own logos. Moss prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 59,800 coffee mugs per month:

Direct material (0.2 lbs. @\(0.25 per lb)

\)0.05

Direct Labor (3 minutes @ \(0.11 per minute)

0.33

Manufacturing Overhead:

Variable (3 minutes @ \)0.06 per minute)

\(0.18

Fixed (3 minutes @ \)0.13 per minute)

0.39

0.57

Total Cost per Coffee Mug

\(0.95

Actual cost and production information for July 2018 follows:

a. There were no beginning or ending inventory balances. All expenditures were on account.

b. Actual production and sales were 62,500 coffee mugs.

c. Actual direct materials usage was 11,000 lbs. at an actual cost of \)0.17 per lb.

d. Actual direct labor usage was 197,000 minutes at a total cost of \(25,610.

e. Actual overhead cost was \)10,835 variable and \(29,765 fixed.

f. Selling and administrative costs were \)95,000.

Requirements

1. Compute the cost and efficiency variances for direct materials and direct labor.

2. Journalize the purchase and usage of direct materials and the assignment of direct labor, including the related variances.

3. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances.

4. Journalize the actual manufacturing overhead and the allocated manufacturing overhead. Journalize the movement of all production costs from Work­-in­-Process Inventory. Journalize the adjusting of the Manufacturing Overhead account.

5. Moss intentionally hired more highly skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise?

The following direct labor variance analysis was performed for Morris.

AC × AQ \(19,800 SC × SQ \)14.00 per DLHr × 1,350 DLHr \(18,900 SC × AQ \)14.00 per DLHr × 1,800 DLHr \(11.00 per DLHr × 1,800 DLHr \)25,200 Efficiency Variance Cost Variance \(5,400 F \)6,300 U

Requirements

1. Record Morris’s direct labor journal entry (use Wages Payable).

2. Explain what management will do with this variance information.
See all solutions

Recommended explanations on Business Studies Textbooks

Financial Performance

Read Explanation

Corporate Finance

Read Explanation

Business Development

Read Explanation

Operational Management

Read Explanation

Business Case Studies

Read Explanation

Managerial Economics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free