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Beta Company produces two products, A and B

Beta Company produces two products, A and B, each of which uses materials X and Y. The following unit standard costs apply:

Product A:
Material X = 4 lbs @ $13, Material Y = 1 lb. @ $8.50, Direct Labor = 1/5 hr. @ $14

Product B:
Material X =6 lbs @ $13, Material Y = 2 lbs @ $8.50, Direct Labor = 1/3 hr. @ $14

During November, 4,200 units of A and 3,600 units of B were produced. Also, 39,000 pounds of X were purchased at $12.40 per pound and 11,000 pounds of Y were purchased at $8.70 per pound; all of these materials (but no other materials) were used for the month's production. This production required 2,025 direct labor-hours at $13.60 per hour.

Questions -
a) Calculate the material price and usage variances for the month.

b) Calculate the labor rate and efficiency variances for the month.

c) How would your answers to (a) and (b) change if you had been told that November's planned production activity was 4,000 units of A and 4,000 units of B?

d) How would your answers to (a) and (b) change if you had been told that November's sales were 4,000 units of A and 3,500 units of B?

Solution Preview

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Beta Company produces two products, A and B, each of which uses materials X and Y. The following unit standard costs apply:

Product A:
Material X = 4 lbs @ $13, Material Y = 1 lb. @ $8.50, Direct Labor = 1/5 hr. @ $14

Product B:
Material X =6 lbs @ $13, Material Y = 2 lbs @ $8.50, Direct Labor = 1/3 hr. @ $14

During November, 4,200 units of A and 3,600 units of B were produced. Also, 39,000 pounds of X were purchased at $12.40 per pound and 11,000 pounds of Y were purchased at $8.70 per pound; all of these materials (but no other materials) were used for the month's production. This production required 2,025 direct labor-hours at $13.60 per hour.

Questions -
a) Calculate the material price and usage variances for the month.
Materials price variance = AQX(APX - SPX) + AQY(APY - SPY)
= 39,000 ...

Solution Summary

This solution is comprised of a detailed explanation to calculate the material price and usage variances for the month.

$2.19