Share
Explore BrainMass

Kohler Clothiers, Crede Manufacturing, Mo Vaughn: variances,

See attached problems.

Kohler Clothiers manufactures women's business suits. The company uses a standard cost accounting system. In March 2005, 11,800 suits were made. The following standard and actual cost data applied to the month of March when normal capacity was 15,000 direct labor hours. All materials purchased were used in production.

Cost Element Standard (per unit) Actual
Direct materials 5 yards at $7.00 per yard $410,400 for 57,000 yards ($7.20 per yard)
Direct labor 1.0 hours at $12.00 per hour $125,440 for 11,200 hours ($11.20 per hour)
Overhead 1.0 hours at $9.30 per hour (fixed $6.30; variable $3.00) $90,000 fixed overhead
$42,000 variable overhead

Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $94,500, and budgeted variable overhead costs were $45,000.

Compute the total, price, and quantity variances for (1) materials and (2) labor, and (3) the total, controllable, and volume variances for manufacturing overhead

Answer questions about variances.
(SO 4, 5)
Crede Manufacturing Company uses a standard cost accounting system. In 2005, 33,000 units were produced. Each unit took several pounds of direct materials and 1? standard hours of direct labor at a standard hourly rate of $12.00. Normal capacity was 42,000 direct labor hours. During the year, 132,000 pounds of raw materials were purchased at $0.90 per pound. All pounds purchased were used during the year.

Instructions
A. If the materials price variance was $3,960 unfavorable, what was the standard materials price per pound? (a) $0.87
B. If the materials quantity variance was $2,871 favorable, what was the standard materials quantity per unit?
C. What were the standard hours allowed for the units produced? (c) 44,000
D. If the labor quantity variance was $8,400 unfavorable, what were the actual direct labor hours worked?
E. If the labor price variance was $4,470 favorable, what was the actual rate per hour? (e) $11.90
F. If total budgeted manufacturing overhead was $327,600 at normal capacity, what was the predetermined overhead rate per direct labor hour?
G. What was the standard cost per unit of product? (g) $29.967
H. How much overhead was applied to production during the year?
I. If the standard fixed overhead rate was $2.50, what was the overhead volume variance? (i) $5,000 F
J. If the overhead controllable variance was $3,000 favorable, what were the total variable overhead costs incurred? (Assume that the overhead controllable variance relates only to variable costs.)
K. Using selected answers above, what were the total costs assigned to work in process? (k) $988,911

BYP 11-2

Mo Vaughn and Associates is a medium-sized company located near a large metropolitan area in the Midwest. The company manufactures cabinets of mahogany, oak, and other fine woods for use in expensive homes, restaurants, and hotels. Although some of the work is custom, many of the cabinets are a standard size.

One such non-custom model is called Luxury Base Frame. Normal production is 1,000 units. Each unit has a direct labor hour standard of 5 hours. Overhead is applied to production based on standard direct labor hours. During the most recent month, only 900 units were produced; 4,500 direct labor hours were allowed for standard production, but only 4,000 hours were used. Standard and actual overhead costs were as follows.

Standard (1,000 units)
Standard 1000 units Actual (900 units)
Indirect materials $ 12,000 $ 12,300
Indirect labor 48,000 51,000
(Fixed) Manufacturing supervisors salaries 22,000 22,000
(Fixed) Manufacturing office employees salaries 13,000 11,500
(Fixed) Engineering costs 26,000 25,000
Computer costs 10,000 10,000
Electricity 2,500 2,500
(Fixed) Manufacturing building depreciation 8,000 8,000
(Fixed) Machinery depreciation 3,000 3,000
(Fixed) Trucks and forklift depreciation 1,500 1,500
Small tools 700 1,400
(Fixed) Insurance 500 500
(Fixed) Property taxes 300 300
Total $147,500 $149,000

Instructions
A. Determine the overhead application rate.
B. Determine how much overhead was applied to production.
C. Calculate the controllable overhead variance and the overhead volume variance.
D. Decide which overhead variances should be investigated.
E. Discuss causes of the overhead variances. What can management do to improve its performance next month?

Attachments

Solution Preview

PROBLEMS

Kohler Clothiers manufactures women's business suits. The company uses a standard cost accounting system. In March 2005, 11,800 suits were made. The following standard and actual cost data applied to the month of March when normal capacity was 15,000 direct labor hours. All materials purchased were used in production.

Cost Element Standard (per unit) Actual
Direct materials 5 yards at $7.00 per yard $410,400 for 57,000 yards ($7.20 per yard)
Direct labor 1.0 hours at $12.00 per hour $125,440 for 11,200 hours ($11.20 per hour)
Overhead 1.0 hours at $9.30 per hour (fixed $6.30; variable $3.00) $90,000 fixed overhead
$42,000 variable overhead

Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $94,500, and budgeted variable overhead costs were $45,000.

Compute the total, price, and quantity variances for (1) materials and (2) labor, and (3) the total, controllable, and volume variances for manufacturing overhead
a. MPV $11,400 U
LPV $8,960 F
OVV $20,160 U
(a) (1) Total materials variance:
$410,400
(57,000 X $7.20) - $413,000
(59,000 X $7.00) = $2,600 F

Materials price variance:
$410,400
(57,000 X $7.20) - $399,000
(57,000 X $7.00) = $11,400 U

Materials quantity variance:
$399,000
(57,000 X $7.00) - $413,000
(59,000 X $7.00) = $14,000 F

(2) Total labor variance:
$125,440
(11,200 X $11.20) - $141,600
(11,800 X $12.00) = $16,160 F

Labor price variance:
$125,440
(11,200 X $11.20) - $134,400
(11,200 X $12.00) = $8,960 F

Labor quantity variance:
$134,400
(11,200 X $12.00) - $141,600
[(11,800 X 1.0) X $12.00] = $7,200 F

(3) Total overhead variance:
$132,000
($90,000 + $42,000) - $109,740
(11,800 X $9.30) = $22,260 U
Overhead controllable variance:
$132,000
($90,000 + $42,000) - $129,900
[(11,800 X $3.00) + $94,500] =  $2,100 U
Overhead volume variance:
Fixed
Overhead
...

Solution Summary

This solution is comprised of a detailed explanation to compute the total, price, and quantity variances for (1) materials and (2) labor, and (3) the total, controllable, and volume variances for manufacturing overhead, determine the overhead application rate, determine how much overhead was applied to production, calculate the controllable overhead variance and the overhead volume variance, decide which overhead variances should be investigated, discuss causes of the overhead variances and answer what can management do to improve its performance next month.

$2.19