Beta Company

Master of Business Administration

Managerial Accounting

BA 206

Written Analysis of the Case

Beta Company

Question # 1: Direct Material Price Variance

Material X = ($15-$14.50) x 39,000 units         = $ 23,4000        FAVORABLE

Material Y = ($9.50-$9.70) x 11,000 units        = $   2,200        UNFAVORABLE

Direct Material Usage Variance

                        Material X                                                                Material Y

P-A = 4,200 units x 4lbs = 16,800                P-A = 4,200 units x 1lbs = 4,200

P-B = 3,600 units x 6lbs = 21,600                P-B = 3,600 units x 2lbs = 7,000

        Standard                   38,400 units                        Standard                  11,400 units

Material X = (38,400-39,000) = 600 units x $ 15 =                $ 9,000 UF

Material Y = (11,400-11,000) = 400 units x $ 9.50        =        $ 3,800 F

DIRECT MATERIAL VARIANCE

Standard        X

Product A = 4,200 x 4         =        16,800 (15)        =        252,800

Product B = 3,600 x 6        =        21,600 (15)        =        324,000

        TOTAL FOR MATERIAL X                                                576,800

Standard        Y

Product A = 4,200 x 1        =        4,200 (9.50)        =        39,900

Product B = 3,600 x 2        =        7,200 (9.50)        =        68,400

        TOTAL MATERIAL Y                                                                108,300

                TOTAL MATERIAL STANDARD                                                685,100

Actual

Material X         =         39,000 x 14.40        =                561,600

Material Y                =         11,000 x  9.70        =                106,700

                TOTAL MATERIAL ACTUAL                                                        668,300                

                        DIRECT MATERIAL VARIANCE        =                                $ 16,800 F

Question # 2

        Direct Labor Rate Variance

= ($ 18 -$ 17.50) x 2,025 hrs. = $ 1,012.50 FAVORABLE

Direct Labor Efficiency variance

Product A = 1/5 hrs x 4,2200 =        840 hrs.

Product B = 1/3 hrs. x 3,600 = 1,200 hrs.

        Total Hrs. Standard                            2,040 hrs.

        Total Hrs. Actual                                        2,025 hrs.

                Total Variance                                        15 hrs. or (15hrs. x $ 18) $ 270

DIRECT LABOR VARIANCE

Standard

        Product A = 4,200 units x 1/5        =  840 ($ 18) =        15,120

        Product B = 3,600 units x 1/3        = 1,200 ($ 18) =        21,600

                                        Standard                                                                        36,720