Albrecht 19.pdf - Marriott School

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EOC | Controlling Cost, Profit, and Investment Centers Chapter 19 993
Required:
Compute the following variances:
1. Materials price variance (this variance is computed at the time of purchase)
2. Materials quantity variance
3. Labor rate variance
4. Labor efficiency variance
P 19-47
LO2
Materials and Labor Variances
Actual materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 tons
Actual hours used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 hours
Standard materials for output (tons) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (a)
Standard hours for output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b)
Actual cost per ton of material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (c)
Standard cost per ton of material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4
Actual cost per direct labor hour . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4
Standard cost per direct labor hour . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (d)
Total direct labor variance* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,625 U
Total direct materials variance** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 400 F
Direct materials price variance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (e)
Direct materials quantity variance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0
Direct labor rate variance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 750 U
Direct labor efficiency variance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (f)
*Total direct labor variance Labor rate variance Labor efficiency variance
**Total direct materials variance Materials price variance Materials usage variance (Materials price variance is computed
at the time of use in production.)
Required:
Compute the missing amounts.
P 19-48
LO2
Materials and Labor Variances
Sports Manufacturing, Inc., produces and sells footballs. The standard cost for materials and
labor for one regulation-size football is as follows:
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2 feet of leather at $5.50 per foot
1 ⁄ 2 hour at $9.00 per hour
During the period, Sports Manufacturing recorded a materials price variance of $100 U and a
materials quantity variance of $380 F. In addition, the company recorded a labor rate variance
and a labor efficiency variance of $1,200 U and $450 U, respectively. Seven thousand
footballs were produced during the period, and the materials inventory did not change during
the period.
Required:
1. Compute the actual costs for materials and labor during the period.
2. Provide the journal entries to record the materials price and quantity variances. (Hint:
The amount of materials purchased and used is the same.)
3. Provide the journal entries to record the labor rate and efficiency variances.
P 19-49
LO2
Materials and Labor Variances
The following information was taken from the records of Liberty Tool Manufacturing
Company for its production of jack-hammers in the month of July:
(continued)