Question

Matthews ​Fender, which uses a standard cost​ system, manufactured 20 comma 000 boat fenders during 2018​, using 143 comma 000 square feet of extruded vinyl purchased at $ 1.30 per square foot. Production required 400 direct labor hours that cost $ 16.00 per hour. The direct materials standard was seven square feet of vinyl per​ fender, at a standard cost of $ 1.35 per square foot. The labor standard was 0.028 direct labor hour per​ fender, at a standard cost of $ 15.00 per hour. Complete the costs and efficiency variances for Direct materials and direct labor. Does the pattern of variances suggest Pro Fender's managers have been making trade-offs? Explain.

Answer 1

The direct materials cost variance is -$3,100 (favorable) and the direct labor cost variance is -$2,000 (unfavorable). The pattern of variances suggests that trade-offs have been made by Pro Fender's managers.

Step-by-step explanation:

The direct materials cost variance can be calculated as follows:

Actual quantity of direct materials used = 143,000 square feet

Actual cost per square foot = $1.30

Standard quantity of direct materials allowed = 20,000 * 7 = 140,000 square feet

Standard cost per square foot = $1.35

Direct materials cost variance = (actual quantity * actual cost) - (standard quantity * standard cost)

= (143,000 * $1.30) - (140,000 * $1.35)

= $185,900 - $189,000

= -$3,100 (Favorable)

The direct labor cost variance can be calculated as follows:

Actual direct labor hours used = 400

Actual cost per hour = $16.00

Standard hours allowed = 20,000 * 0.028 = 560

Standard cost per hour = $15.00

Direct labor cost variance = (actual hours * actual cost) - (standard hours * standard cost)

= (400 * $16.00) - (560 * $15.00)

= $6,400 - $8,400

= -$2,000 (Unfavorable)

The pattern of variances suggests that Pro Fender's managers have been making trade-offs. The favorable direct materials cost variance indicates that the company was able to purchase vinyl at a lower cost than expected, potentially by negotiating better prices or finding alternative suppliers. However, the unfavorable direct labor cost variance suggests that the company may have taken longer than expected to complete the production process, resulting in higher labor costs.

Answer 2

The direct materials cost variance is -$3,100 (favorable) and the direct labor cost variance is -$2,000 (unfavorable). The pattern of variances suggests that trade-offs have been made by Pro Fender's managers.

Step-by-step explanation:

The direct materials cost variance can be calculated as follows:

Actual quantity of direct materials used = 143,000 square feet

Actual cost per square foot = $1.30

Standard quantity of direct materials allowed = 20,000 * 7 = 140,000 square feet

Standard cost per square foot = $1.35

Direct materials cost variance = (actual quantity * actual cost) - (standard quantity * standard cost)

= (143,000 * $1.30) - (140,000 * $1.35)

= $185,900 - $189,000

= -$3,100 (Favorable)

The direct labor cost variance can be calculated as follows:

Actual direct labor hours used = 400

Actual cost per hour = $16.00

Standard hours allowed = 20,000 * 0.028 = 560

Standard cost per hour = $15.00

Direct labor cost variance = (actual hours * actual cost) - (standard hours * standard cost)

= (400 * $16.00) - (560 * $15.00)

= $6,400 - $8,400

= -$2,000 (Unfavorable)

The pattern of variances suggests that Pro Fender's managers have been making trade-offs. The favorable direct materials cost variance indicates that the company was able to purchase vinyl at a lower cost than expected, potentially by negotiating better prices or finding alternative suppliers. However, the unfavorable direct labor cost variance suggests that the company may have taken longer than expected to complete the production process, resulting in higher labor costs.