Koontz Company manufactures a number of products

Accounting Aug 17, 2020

Koontz Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for May.

Standard Cost per Unit Actual Cost per Unit

Direct materials:

Standard: 1.90 feet at $3.60 per foot $ 6.84

Actual: 1.85 feet at $4.00 per foot $ 7.40

Direct labor:

Standard: 1.05 hours at $14.00 per hour 14.70

Actual: 1.10 hours at $13.50 per hour 14.85

Variable overhead:

Standard: 1.05 hours at $7.00 per hour 7.35

Actual: 1.10 hours at $6.60 per hour 7.26

Total cost per unit $ 28.89 $ 29.51

Excess of actual cost over standard cost per unit $ 0.62

The production superintendent was pleased when he saw this report and commented: “This $0.62 excess cost is well within the 4 percent limit management has set for acceptable variances. It's obvious that there's not much to worry about with this product." Actual production for the month was 16,500 units. Variable overhead cost is assigned to products on the basis of direct labor-hours. There were no beginning or ending inventories of materials. Required:1. Compute the following variances for May:a. Materials price and quantity variances.b. Labor rate and efficiency variances.c. Variable overhead rate and efficiency variances. 2. How much of the $0.62 excess unit cost is traceable to each of the variances computed in (1) above.3. How much of the $0.62 excess unit cost is traceable to apparent inefficient use of labor time?

1a. Compute the following variances for May, materials price and quantity variances.
1b. Compute the following variances for May, labor rate and efficiency variances.
1c. Compute the following variances for May, variable overhead rate and efficiency variances. (Indicate the effect of each

How much of the $0.62 excess unit cost is traceable to each of the variances computed in (1) above. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Round your answers to 2 decimal places.)

How much of the $0.62 excess unit cost is traceable to apparent inefficient use of labor time? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations. Round your final answers to 2 decimal places.)

Expert Solution

1
a.	Materials price variance	$12,210	U
	(Actual price - Standard price) * Actual quantity
	($4.00 - $3.60) * 30,525

	Material quantity variance	$2,970	F
	(Actual quantity - Standard quantity) * Standard price
	(30,525 - 31,350) * $3.60

b.	Labor rate variance	$9,075	F
	(Actual Rate - Standard Rate) * Actual hours
	($13.50 - $14.00) * 18,150 hrs.

	Labor efficiency variance	$11,550	U
	(Actual hours - Standard hours) * Standard Rate
	(18,150 - 17,325) * $14.00

c.	Variable overhead rate variance	$7,260	F
	(Actual Rate - Standard Rate) * Actual hours
	($$6.60 - $$7.00) * 18,150 hrs.

	Variable overhead efficiency variance	$5,775	U
	(Actual hours - Standard hours) * Standard Rate
	(18,150 - 17,325) * $7.00

2
	Materials:
	Price Variance	$0.74	U
	Quantity Variance	$0.18	F	$0.56	U

	Labor:
	Rate Variance	$0.55	F
	Efficiency Variance	$0.70	U	$0.15	U

	Variable overhead:
	Rate Variance	$0.44	F
	Efficiency Variance	$0.35	U	$0.09	F
	Excess of actual overhead standard cost per unit			$0.62	U


3	Excess of actual over standard cost per unit			$0.62	U
	Less portion attributable to labor inefficiency:
	Labor efficiency variance	$0.70	U
	Variable overhead efficiency variance	$0.35	U	$1.05	U
	Portion due to other variances			$0.43	F

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