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Week 5 Assignment

Spinal Contour is a manufacturer of high-quality products designed to help support healthy backs and spines. Their newest product offering is a massage chair. Below is the standard cost structure for the chair:

Standard Cost Sheet: Massage Chair

Metal tubing	5 meters @ $3.50	$17.50
Leather	3 square meters @ $5.00	$15.00
Padding	4 kilograms @$3.50	$14.00
Direct labor	3 hours @ $15	$45.00
Total standard cost		$91.50

This month, Spinal Contour manufactured 500 massage chairs. The following costs were incurred:

Actual Costs Incurred for the Month: Massage Chair

Metal tubing	2,600 meters	$9,360
Leather	1,400 square meters	$7,700
Padding	1,900 kilograms	$6,560
Direct Labor	1,400 hours	$21,140
Total cost		$44,850

Adapted from: Zimmerman, J. L. (2014).Accounting for decision making and control (8^th ed.). New York: NY: McGraw-Hill, "Healing Touch", p. 565.

Suppose you are the senior controller for Spinal Contour and you plan to perform a variance analysis of the massage chairs manufactured to determine if the standards are being met. Once you have completed the analysis, you plan to show it to the production department manager and ask for an explanation of any variances that you believe should be examined.

a) Price variance = (actual price - standard price) times quantity bought
	Actual price	Standard price	Quantity bought	Price variance	Favorable or Unfavorable
Metal tubing
Leather
Padding
b) Wage rate variance = (Actual wage rate - standard wage rate) times actual hours
	Actual wage rate	Standard wage rate	Actual hours	Wage rate variance	Favorable or Unfavorable
Direct labor
c)Total price variance	0	0	0	0
d) Quantity variance =
(actual quantity used in production - standard quantity used in production) times the standard price
	Actual Quantity	Standard Quantity	Standard Price	Quantity variance	Favorable or Unfavorable
Metal tubing
Leather
Padding
e) Labor efficiency variance = (actual hours - standard hours) times standard wage
	Actual hours	Standard hours	Standard wage	Efficiency variance	Favorable or Unfavorable
Direct labor
f) Total quantity variance			0
TOTAL VARIANCES
Metal tubing				-
Leather				-
Padding				-
Direct labor				-
TOTAL				-