contestada

Boat Guard, which used a standard cost accounting system, manufactured 210,000 boat fenders during the year, using 1,780,000 feet of extruded vinyl purchased at $1.30 per foot. Production required 4,900 direct labor hours that cost $13.00 per hour. The materials standard was 8 feet of vinyl per fender at a standard cost of $1.40 per foot. The labor standard was 0.024 direct labor hour per fender at a standard cost of $12.00 per hour.


1. Compute the price and quantity variances for direct materials. Compute the rate and efficiency variances for direct labor.

2. Does the pattern of variances suggest that the company’s managers have been making trade-offs? Explain.

Respuesta :

Answer and Explanation:

According to the scenario, computation of the given data are as follow:-

1. Direct Material Price is

= Actual Quantity × (Standard Rate - Actual Rate)

= 1,780,000 × ($1.40 - $1.30)

= 1,780,000 × 0.10

= $178,000 Favorable

Direct Material Quantity Variance is

= Standard Rate × (Standard Quantity - Actual Quantity)

= $1.40 × [(210,000 × 8) - 1,780,000]

= $1.40 × (1,680,000 - 1,780,000)

= $1.40 × -100,000

= -$140,000 Unfavorable

Direct Labor Rate Variance is

= Actual Hour × (Standard Rate - Actual Rate)

= 4,900 hours × ($12 - $13)

= -4,900 hours × $1

= -$4,900 Unfavorable

Direct Labor Efficiency Variance is

= Standard Rate × (Standard Hours - Actual Hours)

= $12 × [(210,000 × 0.024) - 4,900]

=  $12 × [5,040 - 4,900]

= $12 × 140 hour

= $1,680 Favorable

2. As we can see that the material price variance and labor efficiency variance comes in favorable while on the other side, the material quantity variance and labor rate variance comes in unfavorable.

And we assume that the managers are purchasing the materials efficiently at lesser rates and the usage is not efficient.

Consequently , labor is efficient if the company paid at higher rate.

Therefore the managers are making trade offs.

Moreover, they are compromising of labor rate so that there would be rise  in efficiency.

And at the same time if cheaper material is buyed so the quality is compromised and the changes of wastage is high that reflects the  material quantity variance unfavorable

Otras preguntas