Nov 23, 2024
NTR 100 COMPLETE Syllabus and Academic Integrity Acknowledgement Arizona State University
NTR 100 COMPLETE Syllabus and Academic Integrity Acknowledgement Question 1 1 / 1 pts I have read the ASU …
Mastery Problem: Direct Labor Cost Variance
Direct Labor Cost Variance Analysis
Direct labor cost variance analysis is used primarily as a performance evaluation measure for responsible managers in a segment of a business. Direct labor cost variance occurs when the cost of labor or the amount of labor used deviates from what was budgeted by company management during initial planning, for either a given period of time or for a specific amount of production. Direct labor cost variance analysis is conducted by comparing the standard direct labor rate for production with the actual direct labor rate incurred for the production of the product.
There are two parts to direct labor cost variance analysis. The first is a comparison of the standard rate per unit of labor with the actual rate per unit of labor, which results in the determination of the direct labor rate variance. The second is a comparison of the standard quantity of use of units of labor with the actual quantity of use of units of labor for the actual production achieved, which results in the determination of the labor efficiency (usage) variance.
Direct Labor Rate Variance
This type of variance is concerned with the difference between what was paid for labor and what should have been paid for labor for the actual production achieved.
Which of the following activities are possible causes of direct labor rate variance? Select “Yes” for all that apply.
1. A lower-skilled laborer doing a higher-skilled task Yes 2. A higher-skilled laborer doing a lower-skilled task Yes
3. Unexpected overtime Yes
Direct Labor Time Variance
This type of variance is concerned with the difference between the labor hours that were actually used and the labor hours that should have been used.
Which of the following activities are possible causes of direct labor time variance? Select “Yes” for all that apply.
1. A higher-than-normal defect level resulting in unplanned additional work Yes
2. A high turnover rate among skilled employees Yes
3. Using outdated time estimates in determining the standard rate for direct labor Yes Feedback
For the direct labor rate variances, determine whether each item will impact the total price paid for the labor.
For direct labor time variances, determine whether each item will impact the quantity of hours used.
Gauging the Favorableness of Variances
When variances occur, they are described as being either favorable or unfavorable. When actual activity consumes more time or money than initially planned, an unfavorable variance exists. However, when actual activity consumes less time or money than initially planned, a favorable variance exists. Note that the terms favorable and unfavorable are used, rather than saying that a variance is good or bad, because until the cause of a variance is discovered, it is not clear whether a variance is either good or bad.
Note: Use the minus sign to indicate negative values (when the budgeted amount is greater than the actual).
If a company calculates that the actual cost for the actual hours worked by employees was $4,100,000, and the amount budgeted for those hours actually worked
-400000
was $4,500,000, the actual cost for hours worked less the budgeted cost for hours worked is $fill in the blank 9e579806807f071_1 . This tells you that the actual cost at actual hours worked is less than the budgeted cost at actual hours worked.
What type of variance is this?
Favorable direct labor rate variance
If a company calculates that the budgeted cost for actual hours worked is $200,000, and the budgeted cost at the budgeted amount of hours to have been worked is $150,000, the budgeted cost at actual time worked less the budgeted cost at budgeted hours to have been worked is $fill in the blank 9e579806807f071_4
50000
. This tells you that the actual hours worked at budgeted cost is greater than budgeted hours worked at budgeted cost.
What type of variance is this?
Unfavorable direct labor time variance
Feedback
Subtract the budgeted amount from the actual amount to get the sign correct. Note that if an amount spent or hours used for labor goes down, then profits for the company go up, so a negative direct labor cost variance is favorable.
Likewise, an increase in the amount spent or hours used would decrease profits, so this would be an unfavorable variance.
Standard Direct Labor Cost
The controller at your shoemaking company has determined that under normal conditions, you pay your employees $8.40 per hour, and it will take 2.6 hours of labor per pair of shoes. Given this information, calculate the standard cost of labor per pair of shoes. If required, round the standard labor per pair of shoes to the nearest cent.
Manufacturing
Standard Price x Standard Hours per Pair = Standard Cost per Pair
Costs fill in the blank $fill in the blank
$fill in the blank 4bcfabfa3fccfe0_1
8.4
2.6
21.84
Direct Labor 4bcfabfa3fccfe0_2 4bcfabfa3fccfe0_3
per hour hours
Feedback
Use the standard price and standard hours values shown to compute the standard labor cost per pair.
Actual Direct Labor Cost
During July, your shoe-making company incurred actual direct labor costs of $62,211 for 6,990 hours of direct labor in the production of 2,175 pairs of shoes. Given this information, calculate the actual cost of labor per hour. If required, round the actual cost of labor per hour to the nearest cent.
Manufacturing
Actual Total Cost / Actual Total Hours = Actual Cost per Hour
Costs
$fill in the blank fill in the blank $fill in the blank
Direct Labor 7cda4d034063fab_1 7cda4d034063fab_2 7cda4d034063fab_3
62211 6990
8.9
hours
Feedback
Use the actual total cost of labor and actual hours used as shown to compute the actual labor cost per hour.
APPLY THE CONCEPTS: Conduct the direct labor cost variance analysis
Illustrated Example: Calculating Direct Labor Cost Variance
Complete the following graphic to compute the direct labor rate variance, the direct labor time variance, and the total direct labor cost variance for your shoemaking business. When required, enter the rates as dollars and cents. If required, use the minus sign to indicate a negative value.
Actual Cost Standard Cost
Actual Hours x Actual Rate Actual Hours x Standard Rate Standard Hours x Standard Rate
fill in the blank
e736d902d01806f_1 x $fill in the blank e736d902d01806f_2 fill in the blank
e736d902d01806f_3 x $fill in the blank
e736d902d01806f_4 fill in the blank
e736d902d01806f_5 x $fill in the blank
e736d902d01806f_6
6990 8.9 6990 8.4 5655 8.4
6990 8.9 6990 8.4 5655 8.4
$fill in the blank
\= e736d902d01806f\_7 =
62211
Direct Labor Rate Variance
$fill in the blank $fill in the blank
e736d902d01806f\_10 - e736d902d01806f\_11
62211 58716
$fill in the blank
\= e736d902d01806f\_14 U
3495
Total Labor Cost Variance
$fill in the blank
e736d902d01806f\_18 -
62211
\=
Feedback
$fill in the blank $fill in the blank e736d902d01806f_8 = e736d902d01806f_9
58716
47502
Direct Labor Time Variance
$fill in the blank $fill in the blank e736d902d01806f_12 - e736d902d01806f_13
58716 47502
$fill in the blank
= e736d902d01806f_16 U
11214
$fill in the blank
e736d902d01806f_19
47502
$fill in the blank
e736d902d01806f_20 U
14709
Mastery Problem: Direct Materials Cost Variance
Direct Materials Cost Variance Analysis
Variance analysis is used as a performance evaluation measure for responsible managers. Direct materials cost variance occurs when the cost of materials or the amount of materials used for actual output deviates from what was initially planned by company management for a given period of time or for a specific amount of production. Direct materials cost variance analysis is conducted by comparing the standard materials cost for production with the actual materials cost incurred for the actual production quantity of the product.
There are two parts to direct materials cost variance analysis. The first is a comparison of the standard cost per unit of materials with the actual cost per unit of materials, which results in the determination of the direct materials price variance. The second is a comparison of the standard quantity of use of units of materials with the actual quantity of use of units of materials for the actual production completed, which results in the determination of the direct materials quantity variance.
Direct Materials Price Variance
This type of variance is concerned with the difference between what was paid for materials and what should have been paid for materials used in production.
Which of the following activities are possible causes of direct materials price variance? Select “Yes” for all that apply.
1. Using lower-quality materials than planned Yes
2. Using higher-quality materials than planned Yes
3. Unexpected quantity discounts Yes
Direct Materials Quantity Variance
This type of variance is concerned with the difference between materials used and materials that should have been used for the actual output.
Which of the following activities are possible causes of direct materials quantity variance? Select “Yes” for all that apply.
1. Having a higher-than-normal product defect rate Yes
2. Using more materials in the actual production than planned Yes
3. Using less materials in the actual production than planned Feedback Yes
For the price variances, determine whether each item will impact the total price paid for the materials.
For usage variances, determine whether each item will impact the quantity of materials used.
Gauging the Favorableness of Variances
When variances occur, they are described as being either favorable or unfavorable. When actual activity consumes more time or money than initially planned, an unfavorable variance exists. However, when actual activity consumes less time or money than initially planned, a favorable variance exists. Note that the terms favorable and unfavorable are used, rather than saying that a variance is good or bad, because until the cause of a variance is discovered, it is not clear whether a variance is either good or bad.
Note: Use the minus sign to indicate negative values (when the budgeted amount is greater than the actual).
If a company calculates that the actual cost for materials used was $4,400,000, and the amount budgeted for those materials was $3,000,000, the actual cost for materials used less the budgeted cost for materials used is $fill in the blank ed75b7f21061058_1
1400000
. This tells you that the actual cost at actual materials used is greater than the budgeted cost at actual hours worked.
What type of variance is this?
Unfavorable direct materials price variance
If a company calculates that the budgeted cost for actual materials used is $200,000, and the budgeted cost at the budgeted amount of materials to have been used is $100,000, the budgeted cost at actual materials used less the budgeted cost at budgeted materials to
100000
have been used is $fill in the blank ed75b7f21061058_4 . This tells you that the actual materials used at budgeted cost is greater than the budgeted materials used at budgeted cost.
What type of variance is this?
Unfavorable direct materials quantity variance
Feedback
Subtract the budgeted amount from the actual amount to get the sign correct. Note that if an amount spent or quantity used for materials goes down, then profits for the company go up, so a negative direct materials cost variance is favorable.
Likewise, an increase in the amount spent or quantity used would decrease profits, so this would be an unfavorable variance.
Standard Materials Cost
The controller at your shoemaking company has determined that under normal conditions, you will spend $8.40 per unit of materials, and it will take 2.6 units of material per pair of shoes. Given this information, calculate the standard cost of materials per pair of shoes. If require, round the standard cost per pair of shoes to the nearest cent.
Manufacturing Costs Standard Price per Unit of Material x Standard Materials per Pair = Standard Cost per Pair
$fill in the blank 8f41c7f6cf9304c_1 fill in the blank
8f41c7f6cf9304c_2 $fill in the blank
8.4
2.6
Direct Materials 8f41c7f6cf9304c_3
per21.84 units unit
Feedback
Use the standard price and standard materials values shown to compute the standard cost per pair.
Actual Materials Cost
During July, your shoemaking company incurred actual direct materials costs of $62,211 for 6,990 units of direct materials in the production of 2,175 pairs of shoes. Given this information, calculate the actual cost of materials per unit. If require, round the actual cost of materials per unit to the nearest cent.
Actual Total Cost Actual Materials Actual Cost
Manufacturing
of Materials / Used = per Unit
Costs
$fill in the blank fill in the blank $fill in the blank
Direct Materials 5eb54a01bfa0fce_1 5eb54a01bfa0fce_2 5eb54a01bfa0fce_3
6990
62211
8.9
units
Feedback
Use the actual total cost of materials and actual materials used as shown to compute the actual cost per unit of materials.
APPLY THE CONCEPTS: Conduct the Direct Materials Cost Variance Analysis
Complete the following graphic to compute the direct materials price variance, the direct materials quantity variance, and the total direct materials cost variance for your shoe-making business. When required, enter the rates as dollars and cents. If required, use the minus sign to indicate a negative value.
Illustrated Example: Calculating Direct Materials Cost
Actual Materials x
fill in the blank
6990
fe53160b4fd3006_ x
1
\= Variance
Actual Cost Standard Cost
Actual Rate Actual Materials x Standard Rate Standard Materials x Standard Rate
$fill in the blank
fe53160b4fd3006_ fill in the blank $fill in the blank fe53160b4fd3006_ x fe53160b4fd3006_ fill in the blank
fe53160b4fd3006_ $fill in the blank
x fe53160b4fd3006_
8.9
6990
8.4
5655
8.4
23456
$fill in the blank
fe53160b4fd3006_ $fill in the blank
= fe53160b4fd3006_ $fill in the blank
= fe53160b4fd3006_
62211
58716
47502
789
Direct Materials Price Variance Direct Materials Quantity Variance
$fill in the blank $fill in the blank $fill in the blank $fill in the blank
- - fe53160b4fd3006_ fe53160b4fd3006_1 fe53160b4fd3006_ fe53160b4fd3006_
62211 58716 58716 47502
10 1 12 13
$fill in the blank $fill in the blank
= fe53160b4fd3006_ U = fe53160b4fd3006_ U
3495 11214
14 16
Total Direct Materials Cost Variance
$fill in the blank $fill in the blank
fe53160b4fd3006_ - fe53160b4fd3006_
62211
47502
18 19
$fill in the blank
= fe53160b4fd3006_ U
14709
20
Feedback
Mastery Problem: Manufacturing Cost Variance (Actual Costs Compared to Standard Costs)
Manufacturing cost variances may come from material costs that are higher or lower than expected, material usage that is not what was expected, higher or lower labor costs than expected, or more or less time spent to produce an item than expected. Overhead cost and volume variances are another cause for costs to be higher or lower than what was expected. The total manufacturing variance can be broken down by cost type (materials, labor, overhead) and further by cost variances within cost types and usage or efficiency variances within cost types:
↗
↘
Manufacturing cost variances are determined using a standard costing system. Standard costs are predetermined costs that should be incurred under efficient operating conditions. Standard costing is most suited to manufacturing organizations, where activities consist of common or repetitive operations and the direct costs required to produce each item are defined.
In a standard costing system, it is important to understand that costs are compared to budget based on a flexible budget rather than a fixed budget. Flexible budgets use standard costs and actual production volume. This means that the actual costs in the period are compared to the number of units produced in the period at the standard cost.
Feedback
Standards are set up as part of the budgeting process and are used when per unit costs can be estimated under efficient operating conditions. Remember that flexible budgets account for changes in volume.
If actual costs are greater than standard costs, the variance is unfavorable , alternatively, if actual costs are less than standard costs, the variance is favorable .
Direct Materials Cost Variance
Calculating Direct Materials Cost Variance, you can see that the actual costs are higher than standard and the actual quantity purchased and used is less than standard. The two variances are combined for a total favorable direct material cost variance of $fill in
the blank 6584f6fe606e02b_6 .
Direct Labor Cost Variance
Calculating Direct Labor Cost Variance, you can see that the actual costs are higher than standard and the actual hours are less than standard. The two variances are combined for a total favorable direct labor cost variance of $fill in the blank 6584f6fe606e02b_10
.
Feedback
The illustrations provide the information to complete the problem.
The standard cost sheet for a product is shown.
Standard Cost Manufacturing Costs Standard price Standard Quantity per unit
• 18,200 pounds of material purchased at $4.55 per pound
• 6,510 hours of labor at an hourly rate of $12.15 per hour
• Actual overhead in the period was $16,220
Fill in the Budget Performance Report for the period. Some amounts are provided. Round your answers to the nearest dollar. However, do not round your intermediate calculations.
Budget Performance Report
Manufacturing Costs:
3,000 units Actual Costs Standard (Favorable)/ Costs Unfavorable
Direct materials $82,810 $fill in the
$fill in the blank
blank
330c6c06806cfc 330c6c06806cf
4_2 c4_1
-380
83190
Variance
Direct labor fill in the blank
330c6c06806cf c4_3 fill in the blank
330c6c06806cfc
78,210 4_4
79097 887
fill in the blank fill in the blank
330c6c06806cf 330c6c06806cfc
Overhead 16,220 c4_5 4_6
15840 380
$fill in the $fill in the blank blank
330c6c06806cf 330c6c06806cf $887 c4_7 c4_8
178127 177240
Split the direct materials cost variance into the materials price varaince and the Direct materials quantity variance. Remember that you want to isolate the price variance from the quantity variance so be sure to use factors that do not overlap. Also remember that the two variances should equal the total direct material cost variance.
Direct materials price variance: Direct materials quantity variance:
(Actual price - Standard price) x actual quantity (Actual quantity - Standard quantity) x standard price
$2,730 favorable $2,350 unfavorable
Split the direct labor cost variance into the direct labor rate variance and the direct labor time variance. Remember that you want to isolate the price variance from the efficiency variance so be sure to use factors that do not overlap. Also remember that the two variances should equal the total direct labor cost variance.
Direct labor rate variance: Direct labor time variance:
(Actual hours - Standard hours) x standard
(Actual rate - Standard rate) x actual hours
labor rate
$1,953 unfavorable $1,067 favorable
Manufacturing variances are period costs that are rolled into cost of sales and reported on the income statement . A favorable variance is recorded as a credit and an unfavorable variance is recorded as a debit .
ACC 202 – WEEK 4 – CNOW ASSIGNMENT
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