Managerial Accouting

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University of Perpetual Help System Laguna
Master in Business Administration
Sto. Niño, Biñan, Laguna

MANAGERIAL ACCOUNTING
JAYSON G. GELILIO PROF. MARIA DIANA DELA VEGA, CPA, MBA, PhD.

Problem 20-1

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

| Material X| Material Y| Direct Labor|
Product A| 4 lbs. @ $13| 1 lb. @ $8.50| 1/5 hr. @ $14|
Product B| 6 lbs. @ $13| 2 lbs. @ $8.50| 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.

Required:
a. Calculate the material price and usage variances for the month.

Material Price (Standard)
| Material X| Material Y| Total Price|
Product A| 218,400| 35,700| 254,100|
Product B| 280,800| 61,200| 342,000|
Total| 499,200| 96,900| 596,100|

Material Price (Actual)
Material X = 39,000 @ 12.40Material Y = 11,000 @ 8.70

| Material X| Material Y| Total Price|
| 483,600| 95,700| 579,300|
Difference| 15,600| 1,200| 16,800|

Usage Variance
Material X= 15,600 * 13Material Y= 1,200 * 8.5
= 202,800= 10,200

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?

Material Price (Standard)
| Material X| Material Y| Total Price|
Product A| 208,000| 34,000| 242,000|
Product B| 312,000| 68,000| 380,000|
Total| 520,000| 102,000| 622,000|

Material Price (Actual)
Material X = 39,000 @ 12.40
Material Y = 11,000...
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