# Question: Buenolorl Company produces a well known cologne The standard manufacturing cost

Buenolorl Company produces a well-known cologne. The standard manufacturing cost of the cologne is described by the following standard cost sheet:

Management has decided to investigate only those variances that exceed the lesser of 10 percent of the standard cost for each category or $ 20,000.

During the past quarter, 250,000 four-ounce bottles of cologne were produced. Descriptions of actual activity for the quarter follow:

a. A total of 1.35 million ounces of liquids was purchased, mixed, and processed. Evaporation was higher than expected (no inventories of liquids are maintained). The price paid per ounce averaged $ 0.42.

b. Exactly 250,000 bottles were used. The price paid for each bottle was $ 0.048.

c. Direct labor hours totaled 48,250, with a total cost of $ 733,000. Normal production volume for Buenolorl is 250,000 bottles per quarter. The standard overhead rates are computed by using normal volume. All overhead costs are incurred uniformly through-out the year.

Required:

1. Calculate the upper and lower control limits for materials and labor.

2. Compute the total materials variance, and break it into price and usage variances. Would these variances be investigated?

3. Compute the total labor variance, and break it into rate and efficiency variances. Would these variances be investigated?

Management has decided to investigate only those variances that exceed the lesser of 10 percent of the standard cost for each category or $ 20,000.

During the past quarter, 250,000 four-ounce bottles of cologne were produced. Descriptions of actual activity for the quarter follow:

a. A total of 1.35 million ounces of liquids was purchased, mixed, and processed. Evaporation was higher than expected (no inventories of liquids are maintained). The price paid per ounce averaged $ 0.42.

b. Exactly 250,000 bottles were used. The price paid for each bottle was $ 0.048.

c. Direct labor hours totaled 48,250, with a total cost of $ 733,000. Normal production volume for Buenolorl is 250,000 bottles per quarter. The standard overhead rates are computed by using normal volume. All overhead costs are incurred uniformly through-out the year.

Required:

1. Calculate the upper and lower control limits for materials and labor.

2. Compute the total materials variance, and break it into price and usage variances. Would these variances be investigated?

3. Compute the total labor variance, and break it into rate and efficiency variances. Would these variances be investigated?

**View Solution:**## Answer to relevant Questions

The management of Golding Company has determined that the cost to investigate a variance produced by its standard cost system ranges from $ 2,000 to $ 3,000. If a problem is discovered, the average benefit from taking ...Pat James, the purchasing agent for a local plant of the Oakden Electronics Division, was considering the possible purchase of a component from a new supplier. The componentâ€™s purchase price, $ 0.90, compared favorably ...Multiple-Choice Questions 1. For performance reporting, it is best to compare actual costs with budgeted costs using a. Short-term budgets. b. Static budgets. c. Master budgets. d. Flexible budgets. e. None of these. ...Ross Company provided the following data: Standard fixed overhead rate (SFOR) ..... $ 5 per direct labor hour Actual fixed overhead costs ......... $ 281,680 Standard hours allowed per unit ........ 4 hours Actual ...Refer to the information for Rostand Inc. above. Rostand Inc. operates a delivery service for over 70 restaurants. The corporation has a fleet of vehicles and has invested in a sophisticated, computerized communications ...Post your question