Question :
173.Caffeine Depot a chain of coffee shops. The standard amount : 1302888
173.Caffeine Depot is a chain of coffee shops. The standard amount of ground coffee per cup is 0.80 ounces. During the month of September, the company sold 350,000 cups of coffee and used 18,600 pounds of coffee. Also during September, the company purchased 19,000 pounds of coffee at a cost of $290,700. The standard price per pound is $15. The company views variances greater than 0.8% of the flexible budget amount to be considered significant.
a.Compute the material variances.
b.Do either or both of the variances warrant investigation? Explain why or why not.
174.Shining Car Wash is a mobile car washing services that provides car washes wherever a customer desires. On average it takes 1.8 hours for travel and washing each vehicle. During November, employees spent 1,064 labor hours to wash 560 cars at a total labor cost of $13,300. During December, 960 labor hours were used to wash 480 cars at a total labor cost of $11,520. The wage rate standard is $12.40 per hour.
a.Calculate the labor rate and efficiency variances for each month and indicate if each is favorable or unfavorable.
b.What trends can you spot regarding the variances over November and December? What might be a cause for the labor rate variance? What might be a cause for the labor efficiency variance?
175.Watson Chemical Company produces a chemical used in dry cleaning. Its accounting system uses standard costs. The standards per half gallon can of chemical call for 0.70 gallons of material and 2.0 hours of labor. (0.70 gallons of material are needed to produce a 0.5 gallon can of product due to evaporation.) The standard cost per gallon of material is $5.35. The standard cost per hour for labor is $12.00. Overhead is applied at the rate of $8.95 per can. Expected production is 18,000 cans with fixed overhead per year of $35,100, and variable overhead of $7.00 per unit (a half gallon can).
During 2014, 19,000 cans were produced; 15,000 gallons of material were purchased at a cost of $87,750; 14,000 gallons of material were used in production. The cost of direct labor incurred in 2014 was $465,300 based on an average actual wage rate of $11.75 per hour. Actual overhead for 2014 was $170,000. Calculate the labor variances.
176.Orlando East Hospital is interested in analyzing overhead related to laundry services. The hospital administrator estimated that monthly fixed costs would be $68,000 and variable costs would be $2.50 per patient day. During the month of September, the hospital had 15,800 patient days. Total laundry costs were $108,400. Calculate the controllable overhead variance. Analyze laundry costs for the month of September.
177.Watson Chemical Company produces a chemical used in dry cleaning. Its accounting system uses standard costs. The standards per half gallon can of chemical call for 0.70 gallons of material and 2.0 hours of labor. (0.70 gallons of material are needed to produce a 0.5 gallon can of product due to evaporation.) The standard cost per gallon of material is $5.35. The standard cost per hour for labor is $12.00. Overhead is applied at the rate of $8.95 per can. Expected production is 18,000 cans with fixed overhead per year of $35,100, and variable overhead of $7.00 per unit (a half gallon can).
During 2014, 19,000 cans were produced; 15,000 gallons of material were purchased at a cost of $87,750; 14,000 gallons of material were used in production. The cost of direct labor incurred in 2014 was $465,300 based on an average actual wage rate of $11.75 per hour. Actual overhead for 2014 was $170,000. Calculate the overhead variances and indicate if each is favorable or unfavorable.
CHALLENGE EXERCISES
178.Winston Woolies provided the following summary of variances for the year ended December 31, 2014:
Material price variance$4,200 Favorable
Material quantity variance (3,300) Unfavorable
Labor rate variance 400 Favorable
Labor efficiency variance (2,220) Unfavorable
Controllable overhead variance (1,400) Unfavorable
Overhead volume variance 900 Favorable
Total ($1,420) Unfavorable
At Winston Woolies, the ending balance in Finished Goods inventory is $80,000; the ending balance in Work in Process inventory is $20,000, and the balance in Cost of Goods Sold is $700,000. Winston Woolies considers the total variance to be material and as such, should apportion it among Finished Goods inventory, Work in Process inventory, and Cost of Goods Sold. Prepare a journal entry to close the variance accounts at Winston Woolies.
179.Gifts Galore, Inc. reported the following amounts for 2014:
Actual labor cost$265,100Labor rate variance$3,210 U
Budgeted labor cost$268,500Labor efficiency variance$3,250 F
The company employs management by exception and has a 1.2% materiality threshold based on the budgeted allowance. Should the labor variances be investigated? Support your answer with calculations, and briefly justify why or why not.
