Using Budget for Planning and Coordination - Part 2

1. The following information is available for Mandalay Company:

Actual
Material	12,000 pounds purchased at $2.50 per pound; used 10,500 pounds
Direct Labor	1,800 hours at $12 per hour
Units produced	500
Standard
Material	20 pounds per unit at a price of $2.20 per pound
Direct Labor	4 hours per unit at a wage rate of $10 per hour

Required

1. Determine the material price variance based on the quantity of materials purchased.
2. Determine the material quantity variance.
3. Determine the direct labor rate variance.
4. Determine the direct labor efficiency variance.

2. Shadyside Insurance Company manages a medical insurance program for its clients. Employees of client firms submit claims for reimbursement of medical expenses. Shadyside processes these claims, checks them to ensure that they are covered by the claimant's policy, notes whether the claimant has reached any limit on coverage, computes any deductible, and issues a check for the claimant's refund.

Three types of clerks work in the claims processing department: supervisors, senior clerks, and junior clerks. The supervisors are paid $42,000 per year, the senior clerks are paid $37,000 per year, and the junior clerks are paid $32,000 per year. For every 150,000 claims processed per year, Shadyside plans to use one supervisor, six junior clerks, and two senior clerks.

Last year, the company processed 2 million medical claims and employed 14 supervisors, 30 senior clerks, and 83 junior clerks.

Required

1. Compute the excess costs or cost savings relating to the claims processing staff.
2. How would you interpret these results? What additional information would you ask for if you were making a determination of the clerical group's processing efficiencies?

3. Asahi USA, Inc., based in Denver, Colorado, is a subsidiary of a Japanese company manufacturing specialty tools. Asahi USA employs a standard cost system. Following are the standards per unit of one of its products, tool KJ79. This tool requires a special chrome steel as a direct material.

	Standard Quantity	Standard Price	Standard Cost
Direct materials	8 pounds	$18 per pound	$144
Direct Labor	2.5 hours	$20 per hour	$50
Total			$194

During November, Asahi USA started and completed job KJX86 to manufacture 1,900 units of tool KJ79. It purchased and used 14,250 pounds of the special chrome steel for tool KJ79 at a total cost of $270,750. The total direct labor charged to job KJX86 was $87,500. Job KJX86 required 5,000 direct labor hours.

Required

1. For job KJX86, compute the following and indicate whether the variances are favorable or unfavorable:
2. Direct material price variance
3. Direct material quantity variance
4. Direct labor rate variance
5. Direct labor efficiency variance
6. Provide a plausible explanation for the variances.

* Provide you Answer in an Excel file