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    Variance Analysis for AGRICHEM INDUSTRIES

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    AgriChem Industries manufactures fertilizer concentrate and uses cost standards. The fertilizer
    is produced in 500-pound batches; the normal level of production is 250 batches of fertilizer per
    month. The standard costs per batch are as follows:
    Standard
    Costs per Batch

    Direct materials:
    Various chemicals (500 pounds per batch at $0.60/pound) . . . . . . . . . . $300
    Direct labor:
    Preparation and blending (25 hours per batch at $7.00/hour) . . . . . . . . . 175
    Manufacturing overhead:
    Fixed ($50,000 per month 4 250 batches) . . . . . . . . . . . . . . . . . . . . . . . $200
    Variable (per batch) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 225
    Total standard cost per batch of fertilizer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $700

    During January, the company temporarily reduced the level of production to 200 batches of
    fertilizer. Actual costs incurred in January were as follows:

    Direct materials (102,500 pounds at $0.57/pound) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,425
    Direct labor (4,750 hours at $6.80/hour) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,300
    Manufacturing overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,525
    Total actual costs (200 batches) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $145,250
    Standard cost of 200 batches (200 batches 3 $700 per batch) . . . . . . . . . . . . . . . . 140,000
    Net unfavorable cost variance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,250

    Instructions
    You have been engaged to explain in detail the elements of the $5,250 net unfavorable cost variance
    and to record the manufacturing costs for January in the company's standard cost accounting
    system.

    a. As a first step, compute the materials price and quantity variances, the labor rate and efficiency
    variances, and the overhead spending and volume variances for the month.

    For part A. question I'm responsible for completing the first 3 parts to this question:
    Computation of Materials Price Variance
    Computation of Quantity Variance
    Computation of Labor Rate Variance

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    https://brainmass.com/business/accounting/variance-analysis-agrichem-industries-628058

    Solution Summary

    The solution is provided in excel format and include a step-by-step calculations for solving for the following Variances:
    *Materials Quantity Variance (MQV)
    *Materials Price Variance (MPV)
    *Labor Rate Variance (LRV)
    *Labor Efficiency Variance (LEV)
    *Overhead Spending Variance
    *Overhead Budget Variance

    $2.19

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