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P 10-42
1. Standard Standard
Usage Cost
Direct materials……………………
…
$ 4 25.000 $100.00
2. There would be unfavorable labor efficiency variances for the first 320 units
because the standard hours are much lower than the actual hours at this level.
3. The cumulative average time per unit is an averag
e
. For example, the first
40 units take an average of 2.50 hours per unit. The second 40 take an
average of 1.5 hours per unit [(80 × 2) – (40 × 2.5)]/40 = 1.5, and, therefore,
Standard
Price
CHAPTER 10 Standard Costing: A Managerial Control Tool
P 10-43
1. Normal delivery:
Standard Standard
Price Cost
Direct materials……………… $10.00 9.00 lbs. $ 90.00
Cesarean delivery:
Standard Standard
Price Cost
Direct materials……………… $10.00 21.00 lbs. $210.00
2. MPV = (AP – SP)AQ
MPV (Normal) = ($9.50 – $10.00)35,000 = $17,500 F
3. LRV = (AR – SR)AH
LRV (Normal) = ($11.45* – $16.00)10,200 = $46,410 F
4. Yes. Computations are shown below.
Usage
Standard
Usage
Standard
10-16
CHAPTER 10: Standard Costing: A Managerial Control Tool
P 10-44
1. Liquid Standard = 4.5 × 250,000 × $0.40 = $450,000
Upper control limit (UCL): $495,000 or $470,000; lesser = $470,000
Lower control limit (LCL): $405,000 or $430,000; greater = $430,000
2. Total Liquid Variance = $567,000 – $450,000 = $117,000 U
MPV = ($0.42 – $0.40)1,350,000 = $27,000 U
MUV = (1,350,000 – 1,125,000)$0.40 = $90,000 U
3. Total Labor Variance = $733,000 – $750,000 = $17,000 F
LRV = ($15.19* – $15.00)48,250 = $9,168 U
LEV = (48,250 – 50,000)$15.00 = $26,250 F
10-17
CHAPTER 10 Standard Costing: A Managerial Control Tool
P 10-45
1. April (UCL = Upper control limit, and LCL = Lower control limit)
Materials:
Price standard: $0.25 × 723,000 = $180,750
Labor:
Price standard: $7.50 × 36,000 = $270,000
LCL: ($21,600) + $270,000 = $248,400
May
Materials:
Price standard: $0.25 × 870,000 = $217,500
UCL: (0.08 × $217,500) + $217,500 = $17,400 + $217,500 = $234,900
LCL: ($17,400) + $217,500 = $200,100
Quantity standard: 8 × 100,000 × $0.25 = $200,000
10-18
CHAPTER 10: Standard Costing: A Managerial Control Tool
P 10-45 (Continued)
June
Materials:
Price standard: $0.25 × 885,000 = $221,250
Labor:
Price standard: $7.50 × 46,000 = $345,000
2. April
MPV = ($0.2614* – $0.25)723,000 = $8,242 U ± $14,460 4.6 %
MUV = (723,000 – 720,000)$0.25 = $750 U ± 14,400 0.4
LRV = ($7.5000 – $7.50)36,000 = $0 ± 21,600 0.0
LEV = (36,000 – 36,000)$7.50 = $0 ± 21,600 0.0
May
June
MPV = ($0.2599* – $0.25)885,000 = $8,762 U ± 17,700 4.0 %
A
ctual*
*
Limit
CHAPTER 10 Standard Costing: A Managerial Control Tool
P 10-45 (Continued)
3. Control charts allow us to see when the variances are outside an
acceptable range. They may also show a pattern that might help in
%
MUV:
%
8.0
10.0
8.0
10.0
X
10-20
CHAPTER 10: Standard Costing: A Managerial Control Tool
P 10-45 (Continued)
LRV:
%
LEV:
%
8.0
10.0
8.0
10.0
X
CHAPTER 10 Standard Costing: A Managerial Control Tool
P 10-46
1. MPV = (AP – SP)AQ
= ($1.55 – $1.50)44,250 = $2,213* U
* Rounded to the nearest dollar.
2. LRV = (AR × AH) – (SR × AH)
= Actual Labor Cost – (SR × AH)
3. LRV = (AR × AH) – (SR × AH)
= Actual Labor Cost – (SR × AH)
= $132,000 – ($10 × 13,200) = $0
P 10-47
1. MPV = (AQ × AP) – (SP × AQ)
= Actual Materials Cost – (SP × AQ)
2. LRV = (AR × AH) – (SR × AH)
= Actual Labor Cost – (SR × AH)
10-22
CHAPTER 10: Standard Costing: A Managerial Control Tool
P 10-47 (Continued)
3. The basic advantages offered by a standard costing system include its
use in planning, control, and decision making. A standard costing system
helps in budgeting since the unit standard costs can be multiplied by the
predicted level of production to obtain total costs. Standard costs are
P 10-48
1. MPV = (AP – SP)AQ
= ($4.70 – $5.00)260,000 = $78,000 F
MUV = (AQ – SQ*)SP
2. LRV = (AR – SR)AH
= ($13 – $12)82,000 = $82,000 U
LEV = (AH – SH**)S
R
CHAPTER 10 Standard Costing: A Managerial Control Tool
P 10-48 (Continued)
Production is usually responsible for labor efficiency. In this case, efficiency may
3. Three variances are potentially affected by material quality:
MPV…………………………………
…
$ 78,000 F
4.
Debit Credit
Materials 1,300,000
MPV 78,000
Journal
Date Account & Explanation
10-24
CHAPTER 10: Standard Costing: A Managerial Control Tool
Case 10-49
1. By using a standard costing system, Crunchy Chips can increase control
of its manufacturing inputs. By developing price and quantity standards
for each input, management can compute price and usage variances for
2. The engineering standards are ideal standards. The president’s concern
is probably reflecting doubt that the labor standards can be achieved. If
CASES
CHAPTER 10 Standard Costing: A Managerial Control Tool
Case 10-49 (Continued)
3. Standard cost sheet (for one box of chips):
Direct materials:
Potatoes (15.9375* lbs. @ $0.238)…
…
$3.7931
Direct labor:**
Potato inspection (0.006 hr. @ $15.20)………………………
…
$0.0912
Chip inspection (0.0225 hr. @ $10.30)………………………
…
0.2318
Frying monitor (0.0118 hr. @ $14.00)…………………………
…
0.1652
4. MU
V
= (AQ – SQ****)S
P
= (9,500,000 – 9,350,000)$0.23
8
= $35,700 U
***
*
SQ = 15.9375 × 8,800,000/15 = 9,350,000
10-26
CHAPTER 10: Standard Costing: A Managerial Control Tool
Case 10-50
1. Pat’s decision was wrong and not in the best interests of the company.
His concern for his bonus and promotion was apparently more important
2. The use of standards to evaluate performance and assess rewards
apparently was influential in Pat’s decision. He clearly had a desire to
receive his annual bonus and wanted to present an impressive
3. Purchasing agents have ethical responsibilities similar to accountants.
Integrity is a universally desirable characteristic. Pat and other purchasing
4. Answers will vary.
