Albrecht 19.pdf - Marriott School

76154_23_ch19_p942-1006.qxd 3/1/07 3:35 PM Page 994
994 Part 6 Control in a Management Accounting System | EOC
Materials (actual):
Purchases of wood: 1,300 pounds $2.25
Purchases of steel: 2,750 pounds $4.95
Used 900 pounds of wood
Used 2,525 pounds of steel
Direct labor (actual):
Manufacturing Division: 1,650 hours $13.70
Assembly Division: 920 hours $12.45
Standard cost per unit:
Wood: 1 pound at $2.20 per pound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.20
Steel: 3 pounds at $4.80 per pound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.40
Direct labor—manufacturing: 2 hours at $14.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.00
Direct labor—assembly: 1 hour at $12.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.25
Standard cost per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $56.85
Units produced: 875
Required:
1. Calculate the materials price and quantity variances, assuming that the materials price
variance is recognized at the time of purchase.
2. Calculate the labor rate and labor efficiency variances.
3. Interpretive Question: What is the advantage, if any, of calculating the materials price
variance at the time of purchase rather than at the time of use in production
P 19-50
LO2
Materials and Labor Variance Analysis
Cooke Manufacturing Company produces high-quality men’s pajamas for several large retail
stores. The standard costs for each dozen pairs of pajamas is as follows:
Direct materials, 30 yards at $0.80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24
Direct labor, 4 hours at $5.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Manufacturing overhead:
Variable cost: 4 direct labor hours at $2.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Fixed cost: 30% of direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Total product cost per dozen pairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $58
During the month of September, the company filled three orders of pajamas at the following
costs:
Order Number of Dozens Yards Used Labor Hours
8 400 12,200 1,500
9 900 26,750 3,750
10 500 15,450 2,140
1,800 54,400 7,390
The following additional information involving materials and labor was supplied by the accounting
department:
a. Purchases of materials during the month amounted to 60,000 yards at $0.82 per yard.
b. Total direct labor cost for the month was $37,689.
Required:
1. Compute the materials price variance for September. (Materials are carried in Direct
Materials Inventory at standard.)
2. Compute the materials quantity variance for September.
3. Compute the labor rate and labor efficiency variances for September.