ATC 8-2 (Algo) Variable price and usage variances and fixed manufacturing overhead cost variances Kemp Tables, Inc. (KTI

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ATC 8-2 (Algo) Variable price and usage variances and fixed manufacturing overhead cost variances Kemp Tables, Inc. (KTI) makes picnic tables of 2 * 4 planks of treated pine. It sells the tables to large retail discount stores such as Walmart. After reviewing the following data generated by KTI's chief accountant, the company president, Arianne Darwin, expressed concern that the total manufacturing cost was more than $1.1 million above budget ($6,470,100 - $5,359,200 - $1110,900). Cost of planks per table Coat of labor per table Total variable manufacturing cost per table (a) Total number of tables produced (b) Total variable manufacturing cost ( ab) Total fixed manufacturing cost Total manufacturing cost Actual Results $ 39.90 28.00 $ 67.90 79,000 $5,364,100 1,106,000 $6,470,100 Master Budget $ 30.40 25.20 $ 55.60 77,000 $4,201,200 1,078,000 $5,359, 200 Ms. Darwin asked Conrad Pearson, KTI's chief accountant, to explain what caused the increase in cost. Mr. Pearson responded that things were not as bad as they seemed. He noted that part of the cost variance resulted from making and selling more tables than had been expected. Making more tables naturally causes the cost of materials and labor to be higher. He explained that the flexible budget cost variance was less than $1.1 million. Specifically, he provided the following comparison Cost of planks per table Cost of labor per table Total variable manufacturing cost per table (a) Total number of tables produced (b) Total variable manufacturing cont (b) Total fixed manufacturing coat Total manufacturing cost Actual Results S 39.90 28.00 $ 67.90 79.000 $5,364,100 1. 106,000 $6,470, 100 Flexible Budget $ 30.40 25.20 $ 55.60 29,000 $4,392,400 1.078,000 $5,470,400

HO Based on this information, he argued that the relevant variance for performance evaluation was only $999,700 ($6,470,100 - $5,470,400). Ms. Darwin responded, "Only $999,700! I consider that a very significant number. By the end of the day, I want a full explanation as to what is causing our costs to increase." Required a-1. Based on the following information, determine the total materials cost variance and the price and usage variances. Assuming that the variances are an appropriate indicator of cause. Actual Standard Data Data Number of planks per table 21 19 Price per plank * $ 1.90 * $ 1.60 Material cost per table! $39.90 $30.40 a-2. Based on the following information, determine the total labor cost variance and the price and usage variances. Assuming that the variances are an appropriate Indicator of cause. Actual Standard Data Data Number of hours per table 2.8 3.0 Price per hour x $10.00 X $ 8.40 Labor cost per table $28.00 $25.20 a-3. Determine the amount of the fixed cost spending and volume variances.

the amount of the fixed cost spending and volume variances. Complete this question by entering your answers in the tabs below. Reg A1 Reg A2 Req A3 Based on the following information, determine the total labor cost variance and the price and usage variances. Assuming that the variances are an appropriate indicator of cause. (Indicate the effect of each variance by selecting * for favorable. "U" for unfavorable, and "None for no effect (1.e., zero variance).) Labor variances Total labor cost variance Price variance Usage variance < Reg A1 Req A3 > U

a-3. Determine the amount of the fixed cost spending and volume variances. Complete this question by entering your answers in the tabs below. Reg A1 Reg A2 Req A3 Determine the amount of the fixed cost spending and volume variances. (Indicate the effect of each variance by selecting "" for favorable, "U" for unfavorable, and "None" for no effect (l.e, zero variance). Fixed cost Variances Spending variance Volume variane < Req A2